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By Dennis Boyko
Created on: February 2, 2010
Current version: 0.24 (April 8, 2010) -- updated research links and added an chart symbol key.
Metrics have been updated with closing prices available on 2010-Sep-08.
Projected fair market stock price for Chesapeake Gold Corp. is C$44.26. The actual closing stock price was C$8.71.
Based on the close of trading on 2010-Sep-08, the current and projected Market Capitalization per ounce of Gold Equivalent for Chesapeake Gold Corp., were:
current market valuation: US$12.02 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$131.32 per ounce of Au Eq.
Chesapeake Gold in situ metal value is approximately 63.6% from gold. The projected fair market capitalization per ounce of gold equivalent was computed as 65% of valuation on the Gold Producer Valuation line.
Projected fair market stock price for Chesapeake Gold Corp. is derived using the projected fair market valuation at start of production of US$131.32 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$800M -- this is probably a too conservative estimate and will be updated once a Prelimenary Report becomes available (see Discussion below).
Risk Premium: 15% applied to the planned capital expenditure,
Discount Factor: 40% -- set to cover a multi year gap between now and a future start of production on the deposit.
The discounting of the future gold metal prices after the start of production are already fully accounted for in the Gold Producer Valuation Line which is derived from current day market prices and company fundamentals.
The supporting model and the calculations used to produce the projected fair market stock price are detailed in Fair Market Price Calculations.
I expect that target share price for Chesapeake Gold will rise once the above estimate is updated to reflect capital cost figures from the expected Preliminary Report. Quoting from the Chesapeake Gold Metates web page (viewed February 2010):
In the Preliminary Assessment report, M3 will be providing the estimated capital and operating costs of a fully integrated mining operation. Given the large resource base and metallurgical test results, M3 is evaluating production rates of 90,000 tonnes per day and higher. The Preliminary Assessment report is expected to be completed in early 2010.
This blog only considers the Metates project and does not consider the other Mexican properties (no NI 43-101 reports are available) or the Talapoosa property in Nevade which has historical resource of more than 1M ounces of gold.
Chesapeake Gold web site.
Chesapeake Gold 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
Chesapeake Gold Discussion Forum: Silicon Investor
StockCharts.com for price charts.
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.
Gold Key:
AEM
| AND
| CRK
| G
| GAM
| GGC
| K
| NG
| PZG
| RIO
| RPM
| TVI
| YRI
Mouse over a key symbol to read graph values
Click on a key symbol to view valuation blog
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Try our Funded Research progam.
Reasonable rates and excellent value.
For the chart above, Chesapeake Gold Corp. has an average ore value per tonne (y axis) of US$36.49 and a Market Capitalization per ounce of Gold Equivalent of US$12.02.
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 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.
The Gold Producer Valuation Line rational is presented in the Gold Explorer-Producer Valuation blog.This blog is based on the stock fundamentals and current metal prices as documented in the Chesapeake Gold Metal Valuation Report.
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 Major Gold Producer Valuation Line is shown to be linear with respect to increasing ore value. From available data, this assumption appears sound for evaluating Chesapeake Gold.
I have listed the best of links for anyone interested in researching Chesapeake Gold further. If you have a blog or site with Chesapeake Gold 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.
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