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By Dennis Boyko
Created on: April 5, 2010
Current version 1.1 : January 18, 2012 -- increased the Soho Resource valuation relative to the Gold Producer valuation line
from 40% to 47.5% to account for the significant percentage of silver content in the ore.
Metrics have been updated with closing prices available on 2012-Feb-03.
Projected fair market stock price for Soho Resources Corp., based on the current NI 43-101 resource disclosures for the Tahuehueto deposit, is C$0.13. The actual closing stock price was C$0.05.
At the close of trading on and based on NI 43-101 reports available in April 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Soho Resources Corp., were:
current market valuation: US$5.99 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$83.13 per ounce of Au Eq.
Soho Resources Corp. in situ metal value is 42.1% from gold and 16.4% from silver. Soho Resources Corp. is being valued at 47.5% of the Gold Producer Valuation Line (the significant silver content consider to close the gap with respect to the Gold Producer Valuation Line Estimate). The copper, lead and zinc metals, which make up the remainder of the ore value per tonne, are assumed to be credits towards the per ounce production costs of the gold and silver. However a credit is NOT applied.
The average ore value per tonne was US$222.
Projected fair market stock price for Soho Resources Corp. is derived using the projected fair market valuation at start of production of US$83.13 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$89.1M -- based on the Positive Preliminary Economic Assessment for Current Resource Identified at Tahuehueto" news release October 4, 2010.
Risk Premium: 15% applied to the capital expenditure,
Discount Factor: 15% -- set to account for the possible lose of in situ metal from mine design, metalurgical recoveries and like factors. This value assumes upside exploration potential at the property which is reasonable given the open potential at the project.
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 the company's Tahuehueto property and does not assign any value to the Jocuixtita project. This is clearly a very conservative approach since the Tahuehueto property has not been fully explored as the following company map shows.
The Jocuixtita project is situated within 50km the San Dimas mine which has over 10 million oz gold and 1 billion oz of silver.
The following map from the same Soho Resources presentation shows the general geographical context for the Tahuehueto deposit.
Reuse of existing and plan infrastructure, such as the Topolobampo Deep Sea Port, may result in development scenarios with lower capital costs. The project fair market stock price would rise as capital costs assumptions are lowered.
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, Soho Resources Corp. has an average ore value per tonne (y axis) of US$222 and a Market Capitalization per ounce of Gold Equivalent of US$5.99.
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 Soho Resources 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-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 Gold Producer Valuation Line is shown to be linear with respect to increasing ore value.
Soho Resources Corp., with an average ore value of US$222 per tonne, is believed to be within the upper edge of the linear range of the Gold Producer Valuation Line.
Soho Resources web site.
Tahuehueto Project Recoveries 85.6% gold, 90.1% silver, 87.9% copper, 86.7% lead and 88.1% zinc announced April 20, 2010.
Soho 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.
I have listed the best of links for anyone interested in researching Soho Resources Corp. further. If you have a blog or site withSoho Resources Corp. 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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