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By Dennis Boyko
Created on: March 20, 2010
Current version 0.11: 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 Claude Resources Inc., based on the current NI 43-101 resource disclosures, is C$0.61. The actual closing stock price was C$1.47.
Claude Resources Inc. is a fully integrated Canadian gold mining operation with established gold production at its Seabee mine in Norther Saskatchewan and is developing the Madsen property in Ontario.
Quoting from the Claude Resources Inc.'s January 2010 Short Form Prospectus:
The Madsen properties comprise six contiguous claim blocks totaling approximately 10,000
acres (4,000 hectares) located in the Red Lake Mining District of northwestern Ontario. Included on the
southwestern part of the Madsen properties is the Madsen gold mine and mill.
...
The Corporation intends to use the net proceeds of the Offering to advance the Company's mining and exploration
programs at its' Madsen area properties and for general corporate purposes.
More specifically, the Company is currently reviewing the Technical Report and developing new surface targets at
its' Madsen area properties with drilling expected to begin in March, 2010. Underground, the Company expects to
be dewatered and rehabilitated to the 16th level, including the development of a diamond drill exploration chamber,
by the third quarter of 2010. This drill station will test extensions of the 8 Zone. Concurrently, dewatering will
continue to the 20th level by the end of 2010. The Company intends to incur up to $9 million in exploration and
dewatering costs at Madsen during 2010. The balance of the net proceeds will be incurred in respect of mining and
exploration programs at its' Madsen area properties in 2011 and for general corporate purposes.
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 Claude Resources Inc., were:
current market valuation: US$74.75 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$103.55 per ounce of Au Eq.
Claude Resources Inc. in situ metal value is 94.7% from gold. Therefore Claude Resources Inc. should be valued on the Gold Producer Valuation Line or even at a small premium. However, because its high ore value per tonne, significantly higher than Agnico-Eagle, and given that Claude Resources Inc. is still relatively small for a gold producer, the market capitalization per ounce of gold equivalent was limited to 80% of the Gold Producer Valuation Line.
The average ore value per tonne was US$94.57.
Projected fair market stock price for Claude Resources Inc. is derived using the projected fair market valuation of US$103.55 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$200M -- this figure was set to be very conservative given the following from a March 2010 company presentation slide on Madsen Infrastructure:
500 ton per day permitted mill
5 compartment operating shaft to 4,125 feet
Permitted tailings pond
Environmental monitoring program in place
With existing permits and infrastructure, Madsen can be brough to production with out many of the permitting and regulatory hurdles with significantly lower total capital outlay.
Risk Premium: 20% applied to the capital expenditure,
Discount Factor: 15% -- set to account for the gap before Madsen can be put into production.
Seabee is already in production and does not require discounting. 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 Claude Resources Inc. properties or future acquisitions by the company. The Madsen property in the prolific Red Lake Mining camp consists of aproximately 4,000 hectares and has considerable exploration potential.
The fair market valuation of Claude Resources Inc. illustrates the extent to which junior gold producer such as Claude Resources Inc. can be undervalued by the market. The excellent ore value that the company holds is not consistent with current pricing. As development on Madsen proceeds, I expect that some of the risks the market will start to assign a higher future value to the Madsen holdings and a higher Market Capitalization per ounce of gold to the company.
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, Claude Resources Inc. has an average ore value per tonne (y axis) of US$94.57 and a Market Capitalization per ounce of Gold Equivalent of US$74.75.
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.
Claude Resources Inc., with an average ore value of US$94.57 per tonne, is likely above the linear range of the Gold Producer Valuation Line. Therefore to compensate, the valuation was run at 80% of the Gold Producer Valuation Line.
Claude Resources web site.
Claude Resources 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
Claude Resources Message Board: Yahoo for CGR
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.
I have listed the best of links for anyone interested in researching Claude Resources Inc. further. If you have a blog or site withClaude Resources Inc. 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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