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By Dennis Boyko
Created on: March 16, 2010
Current version 0.22: April 8, 2010 -- added a chart symbol key.
Metrics have been updated with closing prices available on 2012-Feb-07.
Projected fair market stock price for , based on the current NI 43-101 resource disclosures, is C$0.00. The actual closing stock price was C$.
is a stock in recovery. As Lamaque production starts up in Q2 2010, the stock price has an above average probability of generating an extraordinary gain from March 2010 price levels. This valuation does not assign any value to the Alaska Properties, NWT Properties and the Colina Dorada property in Peru.
Quoting from the 's September 30, 2009 MD&A:
The Company's assets at Lamaque and San Juan are very good projects and the potential to realize significant shareholder value from these existing assets is excellent.
I strongly agree with the company's assessment.
At the close of trading on and based on NI 43-101 reports available in March 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for , were:
current market valuation: US$0.00 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$96.67 per ounce of Au Eq.
in situ metal value is % from gold. Therefore should be valued on the Gold Producer Valuation Line or even at a small premium.
The average ore value per tonne was US$.
Projected fair market stock price for is derived using the projected fair market valuation at start of production of US$96.67 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$0M -- Given that upgrade costs at San Juan are just $1.5M and Lamaque is already financed through private placements at the end of 2009, further financing is assumed to be unnecessary. Also the company has close to 40M warrants outstanding from the December 2009 private placement with a strike price of $0.30 which will at some point be converted into stock thus generating working capital for the company.
Risk Premium: 0% applied to the capital expenditure,
Discount Factor: 15% -- set to account for the % of reserves in the Inferred category. However, this is also conservative given the excellent recent drill from the Bedard Dyke at the Lamaque Gold Mine which are not part of the current NI 43-101 compliant estimates.
The discounting of the future gold metal prices after the start of production is already fully accounted for in the Gold Producer Valuation Line which is derived from current day market prices and company fundamentals from a number of established gold producers.
The supporting model and the calculations used to produce the projected fair market stock price are detailed in Fair Market Price Calculations.
This blog does not assign any value to potential for organic growth on current properties or future acquisitions by the company.
The fair market valuation of illustrates the extent to which start-up gold producer such as can be undervalued by the market. The excellent ore value that the company holds is not consistent with current pricing. As production start-up at Lamaque, I expect that some of the risks the market has used to discount the current stock price will be proven wrong.
The Lamaque mine in terms of reserves and resources compares very well to some of the best mines held by Agnico-Eagle. as a whole would no doubt be an excellent addition to Agnico-Eagle. Consider:
Average Ore Value per tonne:
Agnico-Eagle: US$170.6
: US$
Market Capitalization per Ounce of Gold Equivalent:
Agnico-Eagle: US$155.78
: US$
Percentage of Gold Equivalent from In Situ Gold:
Agnico-Eagle: 88.9%
: %
Average Gold Ore Grade:
Agnico-Eagle: 2.7 g/t
: g/t
Agnico-Eagle's La Ronde mine is just up the road from Lamaque. I would not be surprised to see a future move by Agnico-Eagle to do a friendly take over in a deal along the lines of:
Agnico-Eagle makes an all share offer for at a 40% (or x%) premium to a recent close.
Current shareholders receive 1 share a new company for every 20 shares (or y shares).
The new company holds all of the current properties except for the Lamaque Mine.
Agnico-Eagle holds 10% (or z%) of the new company.
Certainly, this is wild speculation on my part. However, is currently too cheap relative to the known problems and the excellent ore grades. Of course it might not be Agnico-Eagle. Any number of other mid-tier gold producers with an interest in a Canadian deposit might make a like offer.
Gold Key:
AEM
| AND
| AUQ
| G
| K
| RIO
| TVI
| YRI
Place mouse over each key symbol to read graph values.
If the key symbol is shown in bold, click to view the GoldMinerPulse valuation blog
for that company.
For the chart above, has an average ore value per tonne (y axis) of US$ and a Market Capitalization per ounce of Gold Equivalent of US$0.00.
The Gold Explorer-Producer Valuation Hypothesis is based on the data driven observation that a company's market capitalization per ounce of gold equivalent tends to rise based on the current valuation of the metals contained in an average tonne of ore. For developer/explorers, it is also assumed that the true Explorer-Producer Gap should be large enough (but no larger) to cover the expected future capital expenditures, risk premiums and time discounts.
The original motivation for the Gold Explorer-Producer Valuation Chart was developed in Junior Gold Explorer Valuation Observations. Application steps and the generic factors that need to be considered in applying this valuation method are further described in Gold Explorer-Producer Valuation Exceptions.
This blog is based on the stock fundamentals and current metal prices as documented in the Century Mining Metal Valuation Report.
The Gold Explorer-Producer Valuation chart is updated after the close of trading using closing stock prices, closing spot market metal prices, fully diluted share counts, and NI 43-101 resource and reserve disclosures.
Last update was for the market close on 2012-Feb-07.
This GoldMinerPulse blog is presented for the sole purpose of illustrating how GoldMinerPulse per company metrics may be useful in judging valuation of individual gold and silver mining stocks. This blog should not be considered as investment advise. Anyone using this blog should become familar with the GoldMinerPulse metrics and the underlying assumptions to access their usefulness.
The Gold Producer Valuation Line is shown to be linear with respect to increasing ore value.
, with an average ore value of US$ per tonne, is be within the upper edge of the linear range of the Gold Producer Valuation Line.
Century Mining web site.
More Century Mining Due Diligence quoting fleeinggrandich, a Stockhouse frequent poster:
It's just a blog, but with loads of information on the stock you've just gotten involved with.
Century Mining Due Diligence is an internal check list run to determine why the company share price was so low in March 2010.
Century Mining NI 43-101 Metal Valuation Report for the company metrics derived using the last close of trading data.
Canadian Insiders for insider trades on the TSX
Sedar for all TSX regulator filings. Sorry but you'll have to navigate the Sedar site as they do not allow direct links to company specific lists of document filings.
I have listed the best of links for anyone interested in researching further. If you have a blog or site with specific pages, please send me the link for review and I will include your work in the link section as appropriate.
Got comments? Questions? Please Talk Back.
The following map of mines in the region of Lamaque are shown in the following image, taken from Century Mining Corporation - "An Emerging Mid-Tier Gold Producer"
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