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By Dennis Boyko
Created on: March 22, 2010
Current version 0.94: April 14, 2011 -- updated CapEx Assumptions to match December 2010 PEA. Resource counts have also been updated based on a 0.2 g/t cut-off
as disclosured in the December 2010 PEA.
Metrics have been updated with closing prices available on 2012-Feb-07.
Projected fair market stock price for Spanish Mountain Gold Ltd., based on the NI 43-101 resource disclosures as documented in the company's Metal Value Report, is C$0.73. The actual closing stock price was C$0.65.
Spanish Mountain Gold Ltd. is an exploration stage company engaged in the acquisition, exploration and development of mineral properties. The Company's primary asset is the Spanish Mountain property located approximately 180 kilometres north of Kamloops, British Columbia.
At the close of trading on and based on NI 43-101 reports available in March 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Spanish Mountain Gold Ltd., were:
current market valuation: US$23.01 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$104.79 per ounce of Au Eq.
Spanish Mountain Gold Ltd. in situ metal value is 97% from gold. Therefore Spanish Mountain Gold Ltd. should be valued on the Gold Producer Valuation Line.
The average ore value per tonne was US$23.44.
Projected fair market stock price for Spanish Mountain Gold Ltd. is derived using the projected fair market valuation of US$104.79 per ounce of Au Eq (as derived above) and the following assumptions:
Capital Expenditure for mine development: US$463.4M -- this is estiamte is based on Table 24-1: Spanish Mountain Capital Cost Summary on p. 170 of 366 in the December 2010 Technical Report.
Risk Premium: 0% applied to the capital expenditure which already includes a significant continguency as well as the 1st year capital and sustaining capital figures,
Discount Factor: 20% -- set to account for the gap before the deposit can be moved into production. This discount accounts for the resource loss from the mining plan (e.g. the open pit mining plan may not contain all of the identified resource), ore processing losses, as well as the time discount between now and the future start of production.
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 Spanish Mountain Gold Ltd. properties or future acquisitions by the company. Some of the current properties held by the company include the HG Property Group with a combined area of 373,000 hectares. Quoting 2008 drill results highlights for the HG Property Group from the MD&A for the period ending September 30, 2009:
Hole SC‐005 : 45.49 g/t gold over 2.5 metres including 223.0 g/t gold over 0.5 metre.
Hole SC‐007 : 1.23 g/t gold over 11.5 metres including 4.83 g/t gold and 232.0 g/t silver over 1.5 metres and 1.32 g/t gold over 6.5 metres in separate horizons.
At the end of March 2010, when this valuation blog was started, the valuation of Spanish Mountain Gold Ltd. appears to be within the margin of errors of the GoldMinerPulse valuation methodology which focuses exclusively on NI 43-101 resource and reserve count disclosures. Future stock price increases are likely to be driven by market expectation of further resource count increases at the Spanish Mountain Gold property or from the HG Property Group.
It is worth noting that the last private placement, Feb 25, 2010 - Spanish Mountain Announces Closing of Financing has a total 15.15M shares that were issued at $0.33 and 15.15M warrants that are exercisable at $0.42. The private placement shares and warrants are restricted until June 24, 2010. Investors consider Spanish Mountain Gold should pay careful attention to the June 24, 2010 end of restrictions date.
Gold Key:
AEM
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| RIO
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| 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, Spanish Mountain Gold Ltd. has an average ore value per tonne (y axis) of US$23.44 and a Market Capitalization per ounce of Gold Equivalent of US$23.01.
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 Spanish Mountain Gold 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-07.
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.
Spanish Mountain Gold 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
Spanish Mountain Gold Message Boards: Agoracom
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 Spanish Mountain Gold Ltd. further. If you have a blog or site withSpanish Mountain Gold Ltd. specific pages, please send me the link for review and I will include your work in the link section as appropriate.
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