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By Dennis Boyko
Created on: February 5, 2010
Version 4.0: December 14, 2011 -- Comparing Rio Alto against Yamana Gold.
Metrics have been updated with closing prices available on 2012-Feb-03.
On a metric basis, Rio Alto has much similarity with Yamana Gold in general and with the Yamana Gold Chapada property in particular.
Rio Alto has an average ore value per tonne (y axis in the chart to the right) of US$35.56 while the same metric for Yamana Gold is US$42.16.
Rio Alto gets 39.5% of its in situ value from gold (with the remainder coming from copper) while the same metric for Yamana Gold is 68.7% (with much of the remainder coming from copper).
On a valuation basis, however, Rio Alto has a Market Capitalization per ounce of Gold Equivalent (x axis in the chart to the right) of US$46.84 while Yamana Gold on the other hand has a Market Capitalization per ounce of Gold Equivalent of US$240.02.
A summary of the Rio Alto La Arena mine, which started production of the Oxide ore in 2011, follows:
| Rio Alto Mining Limited - La Arena Oxide | ||||
| Metal | Classification | Ore Grade | Ore Quantity | Metal Quantity |
|---|---|---|---|---|
| Gold | Measrured + Indicated | 0.460 g/t | 100.70 M t | 1.49 M oz |
| Gold | Inferred | 0.270 g/t | 10.40 M t | 90.28 K oz |
| This mine summary was extracted from the Rio Alto Mining Limited Metal Valuation Report which is based on (NI) 43-101 disclosures current as of 2012-01-05 (yyyy-mm-dd) | ||||
| Rio Alto Mining Limited - La Arena Sulphide | ||||
| Metal | Classification | Ore Grade | Ore Quantity | Metal Quantity |
|---|---|---|---|---|
| Gold | Indicated | 0.240 g/t | 312.70 M t | 2.41 M oz |
| Gold | Inferred | 0.200 g/t | 319.70 M t | 2.06 M oz |
| Copper | Indicated | 2,900.000 g/t | 312.70 M t | 906.83 K t |
| Copper | Inferred | 3,000.000 g/t | 319.70 M t | 959.10 K t |
| This mine summary was extracted from the Rio Alto Mining Limited Metal Valuation Report which is based on (NI) 43-101 disclosures current as of 2012-01-05 (yyyy-mm-dd) | ||||
The Yamana Gold Chapada mine, which is the largest Yamana Gold operation in terms of in situ metal value, although some what larger than La Arena, also has lower grades.
| Yamana Gold Inc. - Chapada | ||||
| Metal | Classification | Ore Grade | Ore Quantity | Metal Quantity |
|---|---|---|---|---|
| Gold | Proven + Probable | 0.230 g/t | 429.17 M t | 3.17 M oz |
| Gold | Measured + Indicated | 0.180 g/t | 434.94 M t | 2.52 M oz |
| Gold | Inferred | 0.120 g/t | 105.33 M t | 406.35 K oz |
| Copper | Proven + Probable | 2,600.000 g/t | 368.72 M t | 958.66 K t |
| Copper | Measured + Indicated | 2,000.000 g/t | 434.94 M t | 869.89 K t |
| Copper | Inferred | 2,000.000 g/t | 105.33 M t | 210.65 K t |
| This mine summary was extracted from the Yamana Gold Inc. Metal Valuation Report which is based on (NI) 43-101 disclosures current as of 2011-04-04 (yyyy-mm-dd) | ||||
Rio Alto valuation in the current market continues to look attractive relative to Yamana Gold, an established, widely followed, and comparable on a metric basis, gold/copper producer. Although part of the difference in lower Market Capitalization per ounce of Gold Equivalent being assigned by the market to Rio Alto relative to Yamana Gold is attributable to the fact that Yamana has several mines in production with years of operating history, the gap between the Rio Alto Valuation (RIO on the chart to the right) versus Yamana Gold (YRI on the chart to the right) is also very large. Given a positive overall outlook for gold/copper deposits in the current market, Rio Alto continues to look attractive at current price levels.
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.
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 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-03.
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 Major Gold Producer Valuation Line is shown to be linear with respect to increasing ore value. From available data, this assumption appears sound for evaluating Rio Alto Mining Limited .
Rio Alto Mining web site.
US$24.25 Million Accessed to Build La Arena Gold Mine, April 20, 2010 news release
Rio Alto Mining NI 43-101 Metal Valuation Report for the company metrics derived using the last close of trading data.
If it looks too good to be true Bob Moriarty, 321gold, likes the La Arena story and is buying Rio Alto shares at this point.
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 Chesapeake Gold further. If you have a blog or site with Chesapeake Gold 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.
The following map clip comes from Ministerio de Energia y Minas, Peru. La Arena is in a central region surrounded by several mines. Projects in RED are exploration projects while projects in YELLOW are in production.
The following map of the La Arena project area is from p. 57 of 59 of the Estudio de Impacto Ambiental (EIA) del Proyecto de Explotación Minera 'La Arena'. The La Arena Public Hearing presentation is also available for inspection at Audiencia Pública Estudio de Impacto Ambiental Proyecto Minero La Arena.
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