Richard,
RE: evaluation of a mining stock, I recently posted the following on the PFG (Pacific Rim Mining thread). I got the info from various sources (Barrons, Doug Casey's Investment Crisis and various articles from the search engines, e.g., AltaVista, Excite, Infoseek).
I hope it will give you some idea on how to evaluate Hawkeye. The trouble or difficulty with evaluating Hawkeye is that, so far, no specific data are available yet, i.e., approximate size of ore body, richness of minerals present etc (see post below).
BTW, see my latest post on the El Callao Mining (ECM) thread.
CHEERS!!!
Richnorth
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+Richnorth (4952 )
From: +Richnorth
Jun 3 1997 2:14AM EST
Reply #4977 of 5686
As I am still a beginner where investing in mining stocks is concerned, I will welcome any comments and criticisms to the following presentation.
In evaluating a mining stock, one has to consider the Five Ps:-
1. People (the quality of the management; note the history of the managers, their track record, the history of the share price, note who are the key players and whether 'hot-shots' are present or are coming on board from some other big company
2. Property (quality or richness of deposit/reserves and feasibility of mining them)
3. Phinancing (or Financing, the how and where of it; note if a "major" is interested or a joint-venture with a "major" is likely)
4. Promotion (an essential for a stock if it is to be noticed above the siren-calls of other stocks)
5. Politics ((government/environment groups/tree-huggers)'s interference has to be considered) etc.
Also, one has to consider the values of the market capitalization which is calculated by multiplying the total number of shares by the current share price, assuming the stock company to be fully valued, and the true asset value which is equal to the sum of the money in the bank plus money already spent on developing the property plus the dollar value of 20% of the total proven and probable reserves. If the true asset value is greater by several factors than the market capitalization, the stock is said to be UNDERVALUED and the stock is likely a very good investment. The stock is said to be OVERVALUED if the market capitalization far exceeds the true asset value.
Alternatively, one could also draw similar conclusions by comparing the share price with the true asset value per share. The latter is calculated from the (true asset value divided by the total number of shares). If the share price is smaller than the true asset value per share by several factors, the stock is said to be undervalued and is likely to be a good investment.
Now let us assume, for the sake of argument, that for PFG, the true asset value is just equal to value of the 20% of the 30% of the 4,000,000 'equivalent oz' gold at Diablillos. This works out to be
(0.2 x 0.3 x 4,000,000 x US$340 x 1.38)/16,000,000 = C$7.04 which is about double the current share price!!! It should be noted that the
preceding calculation does not include
i) the cash balance in the bank and money spent (if any), to date, on developing the property, and the potential values of
ii) other properties of PFG.
It would appear from ALL of the foregoing that PFG has all the ingredients necessary for success and is therefore a good investment!
However, it is possible that I might have overlooked including some other important points. I therefore welcome any additions, comments and criticisms.
Richnorth
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