Gold and Silver Juniors, Mid-tiers and Producers Message Board

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Gold/Mining/Energy : Gold and Silver Juniors, Mid-tiers and Producers

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To: ogi who wrote (54665)	12/28/2007 7:52:43 AM
From: loantech	Read Replies (3) of 78421

Ogi here is a good post regarding WGW/WGI from SH of all places: I just watched it again. He said companies in pre production usually trade at .5 NAV. Once production starts they should trade at a new multiple of 1 - 1.5 NAV. I have to think he is correct and I would challenge anyone to find a legitimate producing gold company that trades much below 1x NAV. So once production for WGI is in full swing (I would assume by second quarter) it should be trading at a minimum of 1x NAV. What is the NAV of WGI? I'm not sure how exactly it is figured out but I think it goes something like this. Even if we just give the gold price the $801 an ounce for everything they sell and give costs of $350 they make $450 an ounce. Say costs increase to $400 an ounce (shouldn't happen but you never know) or gold drops back to $750 and the level of profit per ounce is $400. They have 2.3 million ounces of proven and probable reserves. 2.3 million x $400 = $920,000,000. So before debt is taken into consideration this is the NAV. This isn't including measured and indicated of another 1.2 million ounces as I'm not sure they are included in solid NAV calculations. Now of course any debt would have to be taken off this amount before the actual NAV is known. I think they will have what...$110 - $120 million in debt? That brings us to a NAV of $800,000,000 at 1x NAV we are looking at $5.19 a share. At the higher range multiple of 1.5x we are almost looking at $8 a share (the mine being in the US and basically no risk could easily give WGI the higher end multiple). Move some of the measured and indicated resources into proven and probable and the NAV goes up even more. Move gold above $801 and NAV goes up even more. Keep costs at $350 an ounce add another $100 to the NAV and another 65 cents to share price. If gold stays at around $800 this is a gem. If it goes well above $800 with 80% of their total reserves unhedged we are off to the moon. No matter how you look at it this company, barring some unforseen problem (which is very unlikely considering the mine location) or a horrible crash in gold prices it is a STEAL at these levels

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