For each company,
Need to extract:
1) Fully diluted share # - this can often be found on the company’s web site, sometimes on the homepage (rarely), but much more commonly under the “investor relations” or “investor info” under another tab, for example “share structure”. If not, look for a “financial reports” tab and get it from the latest quarterly financial report. Fully diluted share structure includes outstanding shares plus all outstanding, potentially in-the-money warrants and stock options. If the company has a really poor web site, then you will have to go to sedar and get the latest quarterly financial report.
2) Reserve/Resource #’s. Again, occasionally on the homepage a summary is given. More likely you will have to go to individual project summaries on the company web site. If this fails then check and see if there is a “presentations” tab, as recently made presentations often contain nice, up-to-date summaries of company details, including share structure (in fact, it’s probably best to check the presentations first). If this fails the next place to check is the “financial report” tab and look at the latest annual report for resource numbers. If the company has a J.V. where they are partial owner of the project, you then need to reduce the reserve/resource amount to the percentage owned by the company you are looking at.
I have been very liberal in applying “global” resource numbers, including reserves and much less rigorously defined resources as this exercise is a rough screening tool. I have also used non 43-101 resources calculated by previous explorers if they appear consistent with the results obtained by the present operator. Lots of room for interpretation here.
3) Cash. This is typically found in the latest quarterly financial report on the website. If not, its back to Sedar. Once you have the latest number you need to look at the amount of time lapsed since the number was presented, and guess what kind of cash burn rate they have. For example,if it has been 2 or 3 months since the number you have was generated and they have had several drill rigs working it is likely that a significant percentage of cash has been spent, and a roughly estimated amount is subtracted from the most current number.
Example- Novagold
Under “investor info” go to “presentations” and pick the Nov. 27 06 presentation-
Slide 6 has a bar graph showing growth of reserves and resources and that also accounts for J.V. percentages (e.g. 70% of Donlin Creek). The 2006 figure gives 13.6 mm pounds of Cu and 41.7 m oz of Au (they actually use Au equivalent, counting silver resources in with the Au number and Zn resources are counted in with the copper, I just noticed this) These are the figures I used in the most recent table, and I just now noticed this Au and Ag resource included under a “gold equivalency” and Cu and Zn under a Cu equivalency, so I will correct it now in this example and separate the gold, silver and zinc numbers. These figures also include the non 43-101 resource done by Rio Tinto at Ambler given as under the ambler project description on the company website.
Switching from the numbers given in the presentation to numbers presented on the title page of the website (not including the non-43-101 resource at Ambler) stated as ” A final Feasibility Study for the Galore Creek project estimated Proven and Probable Reserves at 5.3 million ounces of gold, 92.6 million ounces of silver and 6.6 billion pounds of copper . The Company's current Measured and Indicated Resources are 16 million ounces of gold, 24.5 million ounces of silver and 1.9 billion pounds of copper, with additional Inferred Resources of 16.7 million ounces of gold, 66 million ounces of silver and 3.4 billion pounds of copper”, gives
-38 m ozs Au
-183.1 m ozs Ag
-11.9 mm lbs Cu
Adding in the resources from Rio Tinto’s non 43-101 resource at Ambler,
39.6 m ozs Au
247.1m ozs Ag
15.1 mm lbs Cu
4.4 mm lbs Zn
The “investor’s highlights” tab gives a nice summary of the company, including the latest financial highlights. It says “the company spent $19.3 million on mineral property exploration activities and related deferred costs for the quarter…” (Third quarter, ‘06) and “had $158 million in unrestricted cash and cash equivalents at August 31, 2006…”
Using-
Estimated cash position of $100m (very conservative, used very high burn rate of $58 m for the quarter because of Barrick’s take over bid activity on top of exploration, etc..)
The market values NG at 101.7 (diluted shares) x 18.35 = $1.87 billion
Value of Au per oz, putting a value on Ag, Cu and Zn
Valuing the Ag and base metals (using $2/oz Ag, $0.40/lb Cu, and $0.25/lb Zn)
$494 m (Ag) + $6 mm (Cu) + $1.1 mm (Zn) = $7.6 mm.
Estimate of market value for Au/oz is
$1.87 mm -$100 m (cash) - $7.6 mm (Ag/base metals) = -$5.83 mm
-$5.83 mm /39.6 m oz Au = -$147 per oz of Au resource
Market value per oz of Au giving no value to Ag, Cu and Zn.
($1.87 mm - $100m)/39.6 m = $45 per oz
Disclaimers
This is a rough screen only. No weighting is given to the gold grade, mine-ability, equipment value, local circumstances (e.g. laws, political unrest etc.) etc. All of this+ needs to be factored in before making final investment decisions.
Check your own numbers.
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Also, on the last table I mislabled the headers for Au and Ag, they should read m oz, not mm oz. |
