| |
|
Date: September 26, 2009 (v 0.01)
Press Releases:
Fronteer and
Teck announce proposed sale of Agi Dagi and Kirazli gold projects to Alamos,
Alamos Gold Inc. to Acquire Aği Daği and Kirazli Gold Projects in Northwestern Turkey, September 23, 2009.
Alamos Gold is acquiring approximately 1.99M oz of gold and 13.65M oz of silver, 64% Measured + Indicated and 36% Inferred. Using the September 25, 2009 closing prices as a reference point, this deal changes the Alamos Gold market capitalization per ounce of gold equivalent from $173 to $135. Correspondingly, Fronteer's market capitalization per ounce of gold equivalent changes from $95 pre sale to $135 assuming the deal was completed at the close on September 25, 2009.
The corresponding in situ metal values in the Agi Dagi and Kirazli gold deposits are: gold $1,975,050,000 and silver $218,873,620. The sale price terms are equivalent to $40M in cash plus 4M Alamos Gold shares for a September 25, 2009 equivalent price of $56,615,982 which is equivalent to a metal value leverage of 38.8 or a price of $25.55 per ounce of gold equivalent. Assuming Agi Dagi and Kirazli formed a stand alone company with a market capitalization defined by the sale value provides a basis for testing the sale price against other gold mining companies.
The Agi Dagi and Kirazli gold deposits ore value is approximately $38.56 per tonne. Looking a a corresponding chart of ore value versus market capitalization per ounce of gold equivalent and locating the point of a hypothetical company with ore value of $38.56 per tonne and $25.55 yields the following chart September 25, 2009 snapshot where the Agi Dagi and Kirazli gold deposits are positioned based on the valuations shown above.
The Silver Standard Resources Inc (SSO) average gold grade was 0.649 g/t, NovalGold Resources (NG) average gold grade was 1.003 g/t, Canplats Resources Corporation (CPQ) average gold grade was 0.644 g/t, Exeter Resources Corp. (XRC) average gold grade was 0.576 g/t, and Greystar Resources Ltd. (GSL) average gold grade was 1.094 g/t.
At a first look depth, the pricing of Agi Dagi and Kirazli gold deposits appears to be reflective of valuations the market places on like ore deposits after accounting for geographic differences. Specifically, the bulk of NovaGold's in situ gold is in Donlin Creek, Alaska a remote site in a state that has recently campaigned (unsuccessfully) to block the Coeur d'Alene Kensington gold mine development. Likewise Greystar Resources's gold deposit is in a relatively remote part of Columbia per the May 2009 NI 43-101 report:
There are two approach roads to the project starting in Bucaramanga city. The first one is the Matanza-
Surata-California way, a distance of 67 km, and is partially paved.
The other road, which will be the main access to the project, goes through Berlin and Vetas towns. The
Bucaramanga-Berlin stretch is totally paved and covers a distance of 62 km; the Berlin-Vetas section is
a distance of 23.8 km and is unpaved; the route from Vetas to Angostura is a distance of 19.8 km (8 km
of existing unpaved road, and 11.8 km to be built). The total distance from Bucaramanga to Angostura
by the new access road will be 105.6 km.
Finally, consider San Anton Resources (SSN) with an average gold grade of 0.232 and a correspondingly much lower market capitalization per ounce of gold equivalent of less than $5.00.
The Agi Dagi and Kirazli gold deposit sale appears to priced competitively at price points where companies with similar average gold grades are being valued by the market. NovaGold, with its higher ore value but lower market capitalization per ounce of gold equivalent and Greystar Resources with its higher average gold grade but lower market capitalization per ounce of gold equivalent are likely have had their valuation discounted because of geographical considerations.
The pricing of the Agi Dagi and Kirazli gold deposit tends to support the use of Average Ore Value versus Market Capitalization per ounce of gold (or Silver) equivalent as a reasonable basis for testing company valuations. This conclusion is also supported by the fact that the market, which no doubt anticipates the closure of this sale, is assigning Alamos Gold a much lower overall market capitalization per ounce of gold (i.e. the low grade deposit dillutes the valuation) and Fronteer a higher market capitalization per ounce.
| Banner ad GoldMinerPulse. |