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By Dennis Boyko
Created on: December 10, 2010
Current version 1.0: March 15, 2010 -- notes update to reflect the March 11, 2011 resource estimate.
Metrics have been updated with closing prices available on 2012-May-17.
The projected fair market stock price for Crazy Horse Resources Inc. is estimated based on the March 11, 2011 resource estimate announced by the company. Cost assumtptions used in this valuation will be updated once a Scoping Study or PEA is released. The estimated fair market stock price is C$1.20. The actual closing stock price was C$0.2.
At the close of trading on 2012-May-17 and based on NI 43-101 reports available December, 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Crazy Horse Resources Inc., were:
current market valuation: US$1.07 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$17.43 per ounce of Au Eq.
Crazy Horse Resources Inc. in situ metal value is 20% from gold. Therefore Crazy Horse Resources Inc. is valued at 25% of the Gold Producer Valuation Line. The copper value is assumed to be treated as an net credit toward the cost of production.
The average ore value per tonne was US$21.01.
Projected fair market stock price for Crazy Horse Resources Inc. is derived using the projected fair market valuation at start of production of US$17.43 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$100M -- a rough conservative estimate for development given that access to the national power grid and water supply are nearby. The Scoping Study expected in Q1 2011 should provide additional data for refining this estimate.
As an in country point of reference, capital costs at TVI Pacific's Balabag project ran in the range of US$39M to US$58M.
Risk Premium: 20% applied to the capital expenditure,
Discount Factor: 20% -- the discount factor has been set to balance the fact that this project, valued in the report as a gold project, has a very significant copper net credit to production. Further more the deposit remains open on strike and at depth. Location might be viewed as a risk as the Philippines has traditionally not been rated as a mining friendly location. I feel however that the outlook for mining in the Philippines is on the upswing as evidenced by the very successful move into production of companies such as TVI Pacific and Medusa Mining Limited both companies with copper gold production in the Philippines. As a result, I believe that this is a balanced but conservative discount factor.
A value has not been assigned to the company's Kayapa Project or Iron River property.
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 Crazy Horse Resources Inc. project, although Taysan Copper Gold deposit is open on strike and at depth.
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Gold Key:
AEM
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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, Crazy Horse Resources Inc. has an average ore value per tonne (y axis) of US$21.01 and a Market Capitalization per ounce of Gold Equivalent of US$1.07.
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 related 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, related assumptions and current metal prices as documented in the Crazy Horse Resources 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.
Crazy Horse Resource website.
Crazy Horse 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
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 Crazy Horse Resources Inc. further. If you have a blog or site withCrazy Horse Resources Inc. specific pages, please send me the link for review and I will include your work in the link section as appropriate.