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28/10/10
18:02
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Some rough figures below. As per usual subject to individual interpretation, but I feel very strongly the market has EVG wrong, wrong, wrong.
According to the Sept quarterly, finance seems a certainty.
Macquarie Bank Limited will provide US$37.5 million project funding as required over the next 12 months.
So it would appear funding is not an issue.
Why people are selling down is anyone guess, but I feel they are making a mistake.
Some figures on Las Lagunas:
Las Lagunas Gold Project --- EVG holding effective 94% interest:
421,000 oz Au and 3,900,000 oz Ag over its 6.5 year life ---- allow 50/1 for gold equivalent,so say mineable reserve of 500,000 ounces
Annual production 75,000 ounces gold equivalent
Attributable to EVG:
Reserves: 500000* 94% = 470000 ounces
Production: 75000 * 94% = 70000 ounces/year
Enterprise Value (EV) = market capitalization plus total debt
EV/oz production: $2500/ounce
EV/oz Resource: $200/ounce (in this case we could conservatively use $300 as we are talking mine able Reserves
Total debt: $45 million (repaid after first 2 years)
Shares issued: 440 million (no allowance for options)
EV/oz production: 70000 ounces* $2500 = $175 million
EV/oz Resource: 470000* $300 = $141 million
Take the mean between these 2 figures: say $160 million Enterprise Value
Deduct 45 million debt, allow for market Cap of $115 million
440 million shares gives us a share price of 26 cents
Very conservative figures I believe.
1. Makes no allowance for the 2 year debt pay down
2. Makes no allowance for Azuay Gold Mining Project, Ecuador with 65% interest of:
Potential production 75,000 to 100,000 oz Au per year
Potential Resource: + 1 million ounce
3. Makes little allowance for potential bullion price increase
4. Makes no allowance for gold equities bull market, similar to current Rare Earths equity market
5. Makes no allowance for Trujillo Gold Project Peru
6. Makes no allowance for extension of Las Lagunas.
Just figures, so dont anyone invest on my opinions.
I own a few EVG and have high hopes for them.
I wouldnt think that 50 cents would be out of the question over the next couple of years.
Markets are very rarely correct.
They either under value chronically as is the case now.
Lets hope they have a period of chronic overvaluation ahead.
Anything is possible. The market is a very irrational beast.
Regards,
Jim.
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