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By Dennis Boyko
Created on: October 6, 2010
Current version 0.50: October 7, 2010 -- first release.
Metrics have been updated with closing prices available on 2012-May-17.
Projected fair market stock price for Edgewater Exploration Ltd., based on the current NI 43-101 resource disclosures for the Corcoesto Gold deposit only, is C$1.21. The actual closing stock price was C$0.3.
The Corcoesto Gold deposit is the sole basis for this valuation. A value has not been assigned to the Enchi Gold deposit since it does not have an NI43-101 defined resource. Clearly, this is a very conservative valuation approach since Edgewater is spending C$5.0 million in work on the project to earn a 51% interest in Red Back's ownership of the project and thereby form a joint venture company with Red Back. Similarily no value and no acquistion expense has been applied for the Malpica-Tuy Gold project which the company can acquire through its right to purchase 100% of Lundin's Rio Narcea Gold Mines S.L. Finally the Troy property in Ontario, Canada has not been assigned a value nor have any potential expenses been considered.
At the close of trading on 2012-May-17 and based on NI 43-101 reports available October 6, 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Edgewater Exploration Ltd., were:
current market valuation: US$18.87 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$114.14 per ounce of Au Eq.
Edgewater Exploration Ltd. in situ metal value is 100% from gold. Therefore Edgewater Exploration Ltd. should be valued on the Gold Producer Valuation Line or even at a small premium.
The average ore value per tonne was US$88.85.
Projected fair market stock price for Edgewater Exploration Ltd. is derived using the projected fair market valuation at start of production of US$114.14 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$25M -- a very rough estimate for development assuming maximum resuse of excellent infrastructure available in the vicinity of the Corcoesto Gold deposit.
Risk Premium: 10% applied to the capital expenditure,
Discount Factor: 20% -- the discount factor has been set relatively low to reflect the company's significant exploration potential.
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 Edgewater Exploration Ltd. properties, although Enchi Gold property has a very positive exploration potential.
Got comments? Questions? Please Talk Back.
Gold Key:
AEM
| AND
| AUQ
| G
| K
| RIO
| 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, Edgewater Exploration Ltd. has an average ore value per tonne (y axis) of US$88.85 and a Market Capitalization per ounce of Gold Equivalent of US$18.87.
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 Edgewater Exploration 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.
Edgewater Exploration web site.
Edgewater Exploration 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 Edgewater Exploration Ltd. further. If you have a blog or site withEdgewater Exploration Ltd. specific pages, please send me the link for review and I will include your work in the link section as appropriate.