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Gold/Mining/Energy : Fortune Minerals Limited (TSE - FT) -- Ignore unavailable to you. Want to Upgrade?

To: Richnorth who wrote (484)	11/13/2000 10:58:26 AM
From: Dave R. Webb	Respond to of 612

The market never (VERY rarely) values a project based on it's contained metal value. For example, CIBC World Markets this year presents a summary of gold acquisitions where acquirers paid anywhere from US$6 to US$119 per ounce of gold in the measured and indicated categories. It would stand to reason that the gold has to be accessed, extracted and recovered before it can be sold, so it should be valued at some discount. Larger properties have lower discounts, but it would be reasonable to consider mining and recovery cost estimates in doing this. For example: If you assume Nico at 35 million tonnes at 0.1% cobalt and 0.6 gpt gold (rounded for estimating purposes) then Nico may contain something in the order of 77 million pounds of cobalt and 600,000 ounces of gold. Guess a mine recovery of 85% and a mill recovery of 80% (Fortune has calculated these exact numbers, I'm using guesses) and this works out to: about 50 million pounds of cobalt and around 400,000 recoverable ounces of gold. You can now factor in mining and milling costs (around $1.00 per tonne to load drill blast and haul at a large tonnage operation (remember somewhere around 5 tonnes of waste for every tonne of ore), $10 per tonne to process, plus $3 to $5 per tonne or so for fancier recovery techniques). You can do this, but you can see that you end up making a lot of guesses. A lot of this work has been done in Fortunes Annual Reports. You can get them from their website, or from sedar. Dave