Estimating TVI Pacific Fair Market Valuation
By Dennis Boyko
Created on: February 4, 2010
Current version 0.50: September 14, 2010 -- added a note for the expected Balabag NI43-101 update and anticipated impact.
Metrics have been updated with closing prices available on 2012-Feb-03.
Fair Market Valuation Summary - 2012-Feb-03
Projected fair market stock price for TVI Pacific Inc. at the close of trading on 2012-Feb-03 was C$0.07. The actual closing stock price was C$0.045.
Note: An updated NI43-101 report for Balabag is expected in the October/November timeframe. Based on the September news Positive Results From Balabag Gold Project Drill Program, which detailed gold grades from 1.49 g/t to 14.01 g/t and silver grades of 49.18 g/t to 315.07 g/t, over excellent true widths ranging from 3.64m to 7.32m, the expected NI43-101 report (October/November) has a high probability of yielding a very significant increase in the company's total in situ gold and silver with a resultant significant increase in fair market valuations presented in this report.
At the close of trading, the current and projected Market Capitalization per ounce of Gold Equivalent for TVI Pacific Inc., were:
current market valuation: US$38.91 per ounce of Au Eq.
projected fair market valuation as a gold producer: US$122.36 per ounce of Au Eq.
TVI Pacific Inc. in situ metal value is approximately 44.7% from gold and 25.6% from silver with the rest from copper and zinc.
The projected fair market capitalization per ounce of gold equivalent has been set at 70% of valuation on the Gold Producer Valuation line to discount copper and zinc metal values.
The expected valuation change is outlined in the chart below. The market capitaliztaion per ounce of gold equivalent for TVI Pacific is expected to increase from the February 3, 2010 valuation to the projected valuation (projected valuation is 70% of what the valuation would have been on the Gold Producer Valuation Line. That is, the Gold Producer Valuation line is defined by the market fundamentals of Agnico-Eagle (88.9% gold and 7.8% silver) and Kinross (93.1% gold and 2.6% silver) both of which have around 90% of the in situ metal value from gold and silver.
Projected fair market stock price for TVI Pacific Inc. is derived using the projected fair market valuation at start of production of US$122.36 per ounce of Au Eq (as derived above) and the following assumptions:
Risk Premium: 20% applied to the capital expenditure to bring the Balabag property into production. This blog assumes Base Case 1, as detailed on p. 6 of 212 in SCOPING STUDY OF THE BALABAG PROJECT
Discount Factor: 5% -- set to cover account for the time gap of Balabag coming on line. This figure is set at just 5% since the Canatuan mine, which is larger, is already in production.
The discounting of the future gold metal prices after the start of production are already fully accounted for in the Gold Producer Valuation Line which is 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 discounting applied to TVI Pacific Inc. is consistent with the discounting the current market applies to Yamana Gold (YRI on the valuation chart). Yamana's in situ metal value is approximately 33% from gold and the rest from copper and other base metals. As a result, Yamana (YRI) falls well to the left of the Gold Producer Valuation Line in the current market.
Gold Explorer-Producer Valuation
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, TVI Pacific Inc. has an average ore value per tonne (y axis) of US$221.37 and a Market Capitalization per ounce of Gold Equivalent of US$38.91.
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.
Updates
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.
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 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 TVI Pacific Inc. .
Research Links
TVI Pacific web site.
TVI Pacific 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
TVI Pacific Official Discussion Forum is on Facebook.
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 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.
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