Estimating Silvermex Resources Fair Market Valuation
By Dennis Boyko
Created on: November 23, 2010
Current version: 0.1: November 23, 2010 -- first draft
Metrics have been updated with closing prices available on 2012-May-17.
Fair Market Valuation Summary - 2012-May-17
Projected fair market stock price for Silvermex Resources Inc. is C$1.25. The actual closing stock price was C$0.455.
Based on the close of trading on 2012-May-17, the current and projected Market Capitalization per ounce of Silver Equivalent for Silvermex Resources Inc., were:
current market valuation: US$0.53 per ounce of Ag Eq.
projected fair market valuation as a junior silver producer: US$3.31 per ounce of Ag Eq.
Projected fair market stock price for Silvermex Resources Inc. is derived using the projected fair market valuation at start of production of US$3.31 per ounce of Ag Eq (as derived above) and the following assumptions:
Capital Expenditure to complete upgrades: US$190M -- based on the La Guitarra capital expenditures detailed in the December 2009 feasibility study (based on new equipment, includes continguency) plus an additional US$40M allocated to account for development of the San Marcial and the other exploratory properties.
Risk Premium: 50% applied to the planned capital expenditure,
Discount Factor: 33% -- a factor applied to account for the expected ore lose due to mining and processing factors as resources are converted into reserves. This factor does not allocate any potentil future resource additions from additional exploration of the large target rich properties held.
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.
Discussion
The supporting model and the calculations used to produce the projected fair market stock price are detailed in Fair Market Price Calculations.
The potential associated with Silvermex Resources land holdings are not factored into this blog. However, as discussed in Land Holdings Impact Valuation, Silvermex Resources (which include the former Genco La Guitarra land package) may in future receive additional positive valuation to account for its excellent land holdings in a target rich environment.
Caution
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.
Silver Explorer-Producer Valuation
Silver Key:
AXR
| AUQ
| EDR
| IPT
| OK
| PAA
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Reasonable rates and excellent value.
For the chart above, Silvermex Resources Inc. has an average ore value per tonne (y axis) of US$197.89 and a Market Capitalization per ounce of Silver Equivalent of US$0.53.
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 Silvermex Resources Metal Valuation Report.
Research Links
Silvermex Resources web site.
Silvermex 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.
About Links
I have listed the best of links for anyone interested in researching Silvermex Resources further. If you have a blog or site with Silvermex Resources specific pages, please send me the link for review and I will include your work in the link section as appropriate.
Comments?
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