|
|
|
|
By Dennis Boyko
Created on: January 28, 2010
Current version: 0.5 (January 31, 2010), added a link to a blog on land holding considerations.
Projected fair market stock price for Genco Resources Ltd. is C$1.68. The actual closing stock price was C$0.38.
Based on the close of trading on 2010-Mar-10, the current and projected Market Capitalization per ounce of Silver Equivalent for Genco Resources Ltd., were:
current market valuation: US$0.23 per ounce of Ag Eq.
projected fair market valuation as a junior silver producer: US$2.89 per ounce of Ag Eq.
projected fair market valuation as a gold and silver producer: US$3.43 per ounce of Ag Eq.
The projected fair market valuation of Genco Resources Ltd., in operation after plant upgrades are completed, is expected to lie approximately 25% of the way between a point on the Junior Silver Producer Valuation Line and a point on the Major Gold Producer Valuation Line, as determined by an average ore value of US$149.54. This positioning is based on the following observations:
the deposit size and the deposit silver grades are well beyond those typically associated with junior silver producers,
Genco Resources in situ metal values are approximately 32.1% gold and 67.9% silver
Projected fair market stock price for Genco Resources Ltd. is derived using the projected fair market valuation at start of production of US$3.43 per ounce of Ag Eq (as derived above) and the following assumptions:
Capital Expenditure to complete upgrades: US$150M -- as detailed in the December 2009 feasibility study (based on new equipment and includes continguency),
Risk Premium: 100% applied to the planned capital expenditure,
Discount Factor: 50% -- a very conservative factor is picked here to account for possible concerns about the 72% of in situ metal value comes from the Inferred category.
The discounting of the future gold and silver metal prices after the start of production are already fully accounted for in the Junior Silver Producer Valuation Line and the Major Gold Producer Valuation Line which are are both 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.
My orginal blog, Removal of Mine Roadbloack Equals Stock Appreciation Opportunity, details the fundamental changes in Genco Resources which I expect will lead to an extraordinary future price rise. Although the stock price has dropped since my original blog, I do not see any reason to change my very positive outlook on Genco Resources.
One of the major differences between the projected stock price in this blog and the financials in the Genco Announces Completion of Feasibility Study, December 16, 2009 is use of Inferred Resources: GoldMinerPulse estimates include Inferred resources (although with a very high Discount Factor to take a conservative view) while a Feasibiliy Study excludes Inferred resources.
The Genco Increases Mining Reserves 415% to 47 Million Silver Equivalent Ounces news release reserves and resource counts will be factored into the February 1, 2010 GoldMinerPulse updates. Fair market stock price projection changes are minimal since GoldMinerPulse always uses the combined Proven + Probable, Measured + Indicated and Inferred metal counts. However, I am leaving the ultra conservative Discount Factor unchanged at 50% since the percentage of Inferred resources is also largely unchanged.
Genco Provides Mexico Tax Dispute Update, January 27, 2010 is not expected to significantly change my projected future price for Genco.
The potential associated with Genco Resources land holdings are not factored into this blog. However, as discussed in Land Holdings Impact Valuation, Genco Resources may in future receive additional positive valuation to account for its excellent land holdings in a target rich environment. Rather than explaining Genco's current valuation, considering land holdings, further supports the thesis of this blog -- Genco Resources as an above average probability to generate a future extraordinary stock price appreciation as Genco's story is recognized by the market.
Each company on the above chart is represented by its TSX trading symbol. The lower left hand corner of each box on the chart marks the company's Average Ore Value per tonne versus Market Capitalization per ounce of Silver Equivalent.
The Silver Explorer-Producer Valuation Hypothesis is based on the data driven observation that a company's market capitalization per ounce of silver (or gold) equivalent tends to rise based on the current valuation of the metals contained in an average tonne of ore.
The Silver 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.
Please see Silver Explorer-Producer Valuation for a discussion of the Junior Silver Producer Valuatoin Line. The Major Gold Producer Valuation Line is based on the Gold Producer Valuation Line as derived in the Gold Explorer-Producer Valuation blog.
This blog is based on the stock fundamentals and current metal prices as documented in the Genco 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.
The Junior Silver Producer Valuation Line and the Major Gold Producer Valaution Line are both shown to be linear with respect to increasing ore value. From available data, this assumption appears sound.
Genco Resources web site.
Genco 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
StockHouse for an active Genco Resources discussion forum.
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 Genco Resources further. If you have a blog or site with Genco Resources 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.
 |
 |
 |
 |
|
| PartyCasino is the online casino operated by PartyGaming Plc. PartyGaming Plc is listed on the London Stock Exchange and is part of the FTSE 250 in the Travel & Leisure sector. | ||||