How about ARP going to 70 cents before Christmas? It's a better bet than DML was. Anyhow, that's my new prediction. Here's the math using your figure of US$25 per ounce. It's easier to follow the math if I convert it to Canuck first, so let's use a gold value of C$40/oz Au in the ground as the valuation. I realize AQP was higher but the average grade was also much higher and the in-situ value is based on the margin. At any rate here's why ARP is a short now, and especially if it has another up move.
The market cap, at C$2.40, for ARP's 60% interest is C$160 million. This is discounting a 4 million ounce discovery (which has to be economic) at todays Au price. This implies that the resource has to average 2 grams per tonne, or better, to make it economic. As you are aware, all holes to date except #80 are below that grade. If 84 and 85 are sub 2 gram's, the game is over. On the other hand, If 84 and 85 work out that area is still very small and the 4 million ounce resource is improbable. Since this speculating game is about betting on what's probable and selling what's not, don't wait to Christmas to take your tax losses.
Now from the AQP perspective, Newmont, to be operator, will have to buy the 35 million shares it doesn't already own and put up 60% of the cash to put the property into production, if it works. Are they really asleep? The probability is that the stock at C$2.40 is fully valued. |
