Updated Valuation and SWOT - RSG, page-5

Hi Eshmun,

I again agree with what you say in terms of the valuation in relation to reserves implying RSG is undervalued. This is where I think going back to a report I wrote in the Gold thread in Jun 2018 will yield some useful insights.

The valuation can be based on production adjusted for AISC, reserves, resources and other performance metrics one wishes to use. I have preferred to use the valuation relative to AISC-adjusted production as it is a measure that is based on what is observed and delivers cash flows for the company to sustain itself going forward. I place more emphasis on this, but by no means is this metric a complete approach.

What you are saying in your post above is a valuation based on reserves, the gold that is under the ground that is deemed economical to mine based on market assumptions that are relevant to the prevailing environment. The reserves reflect future earnings potential, but what is not known is the expected future cost of extracting the reserves and how much profit/free cash flow can be generated. This is perhaps more speculative.

In terms of the EVN purchase of the TBR stocks that value the acquisition at reserve of $456/oz, this may be overvalued but it may be worth looking at the relative cost of each oz sold to the AISC incurred per oz extracted. Not all oz of gold is equal, some cost more than others to extract.

I agree that going forward RSG may reduce their AISC as the operations gain momentum. This would justify a higher valuation per reserve oz, and will be reflected also in a lower EV/AISC-adjusted production too.

Our discussion above actually complements each other. Hopefully those who follow this can see we are valuing the stock using two different perspectives, both being equally valid and they dovetail each other.

Cheers,
Brian