Anyone interested - based on the WGM report, I constructed a sensitivity model of the potential share price vs. two variable factors - production cost and price of gold. i have summarized the results below: remember, this is based only on the dredging operations.
I set up the model assuming a production rate of 160,000 ozs per year, based on the 10 year 1.6 million oz estimate provided, a value that includes probable and other mineralization figures. I incremented by half-years and started the calculation process at 6 months (0.5 years) and 80,000 ozs. I started the cost to produce at the $93 value and stepped it up by $1 to $120/oz, which is above the 25% maximum variable estimate suggested by WGM - this should be a good estimate of the worst case; my gold price input ranged from $285 to $350, at $5 incements. Remember this treatment is pre-tax, but it does not factor in any market driven premium - that is this represents a PE of 1, and it is based soley on the amount of gold extracted from the dredging operations. Also, I have not added any other potential production from properties that are currently being sought, because these agreements have not been finalized.
The model calculates all possible share prices based on potential price of gold vs production cost.
6 months after production begins the sensitivity analysis shows a share price ranging from 1.32 to 2.05 depending on production and gold price. It is reasonable to assume that gold will not be above $300/oz, therefore, based on a maximum PoG of $300/oz, the share value, at a PE of 1, based on production from dredging operations only, falls in the 1.32 to 1.65 range.
I ran the model out to the end of the 4th year. As you will see, if production is constant - it does not fall behind schedule, or increase as a result of new acquisitions - the share price based only on dredging operations could fall in the range of 10.56 to 14.45.
Remember this is a simple model, and should only be taken at face value. There are likely other factors that I have not included.
If anyone would like a copy of this spreadsheet (Excel - office 97), please PM me. if many requests come in, i will likely wait a day or so, and send out a group e-mail.
Finally, for you economists out there, I welcome any comments or suggstions. This is just a rough cut.
Thank you, toma |
