GoldMinerPulse: Fair Market Price Calculations

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Fair Market Price Calculations

GoldMinerPulse estimates the fair market price of a gold and/or silver company by answering the question:

What will the company look like as a producer?

Although, many exploration companies will never consider making the transition to a producer, their deposits may eventually be purchased by a producer and the purchasing producer is likely to look at the opportunity in a like manner -- that is, what is the ore value, what would this deposit be worth once it was in production, what is it going to cost to reach production, what are the risk premiums and appropriate discounts.

GoldMinerPulse answers the "what will the company look like as a producer" by applying the following steps:

Following the above valuation allows an interested party to focus on the capital expenditures to transition a deposit or deposits(s) into a producing mine(s) and the known exceptions in estimating a value for a company of interest. The issue of future pricing of gold, silver and base metals has been factored out by the Gold Producer Valuation Line and the Junior Silver Producer Valuation Line which are both based on established gold and silver producers and which therefore fully reflect the market's expectation on the future metal prices. The GoldMinerPulse metrics are updated daily with closing prices and as result, predicted fair market share prices will vary on daily basis as the gold and silver valuation lines are updated with the most recent closing prices.

Fair Market Value Calculation

Gold Company

Fair Market Stock Price Estimate = {

{
{Projected Market Capitalization per ounce of Gold Equivalent × Number of Gold Equivalent Ounces
- Capital Expenditure - {Capital Expenditure × Risk Premium }
}
× {1 - Discount Factor }
}
÷ Current Fully Diluted Share Count

}

Silver Company or Gold and Silver Company

Fair Market Stock Price Estimate = {

{
{Projected Market Capitalization per ounce of Silver Equivalent × Number of Silver Equivalent Ounces
- Capital Expenditure - {Capital Expenditure × Risk Premium }
}
× {1 - Discount Factor }
}
÷ Current Fully Diluted Share Count

}

Note: Since all metrics are based on closing metal prices, gold equivalent ounces and silver equivalent ounces have equal value at the closing metal market prices and are therefore interchangable.

Discussion

The fair market stock price estimate is estimated on the basis of the current fully diluted share count since the expected capital expenditures, risk premiums and other discounts have already been attributed. That way whether the capital expenditure requirements are raised through borrowing or issuing shares should not impact the current fair market stock price.

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