Detour Gold Valuation
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By Dennis Boyko
Created on: May 25, 2010
Current version 0.15 : May 28, 2010 -- corrected cut and paste error.
Metrics have been updated with closing prices available on 2012-Feb-07.
Projected fair market stock price for Detour Gold Corporation, based on the current NI 43-101 resource disclosures for the Detour Lake property and the capital expenditure estimates from the May 2010 Feasibility Study, is C$15.23. The actual closing stock price was C$28.09.
At the close of trading on and based on NI 43-101 reports available in May 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Detour Gold Corporation, were:
current market valuation: US$111.69 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$112.94 per ounce of Au Eq.
Detour Gold Corporation in situ metal value is 100% from gold. Detour Gold Corporation is being valued at 100% of the Gold Producer Valuation Line. This valuation is conservative since Kinross, one of the gold miners used to produced the Gold Producer Valuation line, has 93.1% of its in situ metal value from gold and 2.6% from silver.
The average ore value per tonne was US$46.97.
Projected fair market stock price for Detour Gold Corporation is derived using the projected fair market valuation at start of production of US$112.94 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$992M -- based on the May 25, 2010 news release Detour Gold Receives Positive Feasibility Study for Its Detour Lake Gold Project in Ontario Mineral Reserves Increased to 11.4 Million Ounces This estimate will be updated as new financing information is released but as discussed in Risk Premium, is believe to be very conservative given the company's April 2010 cash position (i.e. not all of the CapEx cost would need to be financed).
Risk Premium: 0% -- this risk premium was assumed since the company already holds a significant cash position (C$315M on slide 19 of 25 in DevelopingDetour Lake April 2010.
Discount Factor: 20% -- set to account for the possible lose of in situ metal from mine design, metalurgical recoveries and like factors. This is reasonable since the Metal Valuation Report on which this estimate is based follows the Detour Lake Global Mineral Resource Estimate and not the Detour Lake In-pit Mineral Resource Estimate. As well, the gold from Block A is discounted. See Discussion below for further rational on this choice for the discount factor.
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 the Block A gold properties held by the company and does not assume any further increase in resource counts from the Detour Lake project. This is clearly a conservative approach since Block A already has an identified resource.
Detour Gold web site.
Detour 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
Detour Gold discussion forum: StockHouse
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
| 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, Detour Gold Corporation has an average ore value per tonne (y axis) of US$46.97 and a Market Capitalization per ounce of Gold Equivalent of US$111.69.
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 Detour Gold 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.
Detour Gold Corporation, with an average ore value of US$46.97 per tonne, is believed to be within the upper edge of the linear range of the Gold Producer Valuation Line.
I have listed the best of links for anyone interested in researching Detour Gold Corporation further. If you have a blog or site with Detour Gold Corporation 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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