I just saw your question about how to value a gold miner once they have found a gold resource.
Below is an amended post (to reflect different calcs for AQD)that I posted on GOA's thread last week.
Just jumped on board AQD and Im very excited in their prospects!
I hope the calcs below helps.
Cheers Nectar
Been doing a bit of research on how to best value a small gold miner based on their resource and I've come across something interesting in yesterday's Age.
There is a paragraph near the end of this brilliant article that gives a guide as to how to put a value on a gold miner based on the amount of resource they have.
It is stated that a gold mining company's market value per ounce sits at a level between $100-200 per ounce of resource.
Let's assume a conservative $150 per ounce valuation even though we have record high gold prices. If a 2 million ounce deposit resource is drilled and measured then you could use the following valuation method to get an idea as to how big IMHO Ausquest will be.
$150 x 2million-5million ounces = $300m-750million Market Cap
Currently we have 228 million shares outstanding Est Share Price once resource is measured based on JORC AQD Share Price of between $1.31-$3.28 (2-5 million ounces)
AQD has excellent real estate in West Africa with multi million ounce mines all around their tenements and initial drilling has found high grade gold!
Erosion of faith in currencies, particularly the US dollar, is paying off nicely for Australia's goldminers, whose production has increased with the ever-rising gold price.
For a man carrying the title of ''Treasurer'', Peter Costello sure seemed comfortable getting rid of the treasure.
It was the winter of 1997, and the Reserve Bank of Australia had decided that a gold price around $450 an ounce was the ideal time to part with two-thirds of its bullion.
Conducted in secret over several months, the move spectacularly punctured both the gold price and confidence in the local mining industry.
Advertisement: Story continues below As the goldmining sector cried treason, the fresh-faced treasurer stood firm behind the RBA's $2.4 billion decision.
''Gold no longer plays a significant role in the international financial system,'' Mr Costello was widely quoted as saying. ''One holds it for purposes of diversification.''
Fourteen years and a healthy dose of hindsight later, gold has more than tripled its value against the Australian dollar, and almost quintupled against the ailing US dollar.
The same stockpile would fetch about $7.6 billion if sold today, meaning we are more than $4 billion behind on the deal after accounting for inflation.
As the utterances of US Federal Reserve chairman Ben Bernanke helped propel gold to new heights this week, the metal that seemed to have lost its lustre in 1997 is fast reclaiming its standing as the world's currency of choice.
Amid the sandalwood trees east of Kalgoorlie, Chris Cairns can hardly believe his luck.
In the six years since his company, Integra Mining, acquired the ''Randalls'' deposit, the international spot price for gold has risen by close to
350 per cent.
In the seven months since first gold was poured at the site in September, the price has leapt 17 per cent.
By Thursday, the gold price had enjoyed eight record highs against the US dollar in the space of nine trading days, adding yet more cream to the cake for miners like Integra.
''We like to take credit for a lot of things, but we can't take credit for the timing of the project ? had we tried to plan it any better I don't think we could have,'' Mr Cairns joked.
When the price pushed above $US1500 an ounce shortly before Easter, Mr Cairns was able to contemplate the sort of cash operating margins that were once unthinkable.
''I've been in gold for about 20 years and in the old days if you had a $200-per-ounce margin you were pretty pleased, so (close to) $1000 per ounce is just unprecedented,'' he said.
For a nation versed in the history of its gold rushes, the current boom has enjoyed a comparatively low profile beside the extraordinary export climate for coal, iron ore and LNG.
But cast an eye over the raw statistics, and it's clear the modern boom - which some experts say stretches back to the 1980s - deserves its place alongside the legendary finds in Victoria and Western Australia during the 19th century.
Gold production in Australia grew faster than in any other nation in 2010, soaring 17 per cent.
Australia is now the world's second-biggest producer behind China, with the 2010 haul of 266 tonnes lifting Australia above the third-ranked nation, the US.
While the soaring Australian dollar has blunted some of the gains from rising gold prices over the past six months, this week's Australian dollar price of $1400 an ounce was still close enough to the record high - $1547, set in February 2009 - to be lighting a fire under explorers and the corporate suitors.
Surbiton Associates gold expert Sandra Close says exploration in Australia has been more focused on reviving previously explored deposits than pursuing greenfield discoveries.
The trend is playing out at the scene of Australia's first gold rush near Ballarat, where junior miner Castlemaine Gold hopes to be producing gold by September.
The company took over the field from Lihir Gold in a
$4.5 million fire sale last year.
Castlemaine Gold's managing director, Matthew Gill, says elevated prices are making projects like this more attractive, and that his company could be turning margins close to 100 per cent if gold retains its strength throughout 2011.
''It is certainly causing a review of old mining areas, and the economics of old mining regions are now quite different,'' he said.
But after several years of consolidation in Australia's goldmining sector, Mathew Kaleel from H3 Global Advisors says mergers and acquisitions are likely to continue to be the flavour of the month.
''New discoveries in copper and gold, in terms of grade and quality are becoming much harder to find ? it's much easier to buy something which has already been discovered than to find similar deposits,'' he said.
''Any company that finds or has found a decent deposit, it becomes almost a no-brainer to buy them because their enterprise value per ounce is $100 to $200, and you can't discover gold for that.''
The increasing hold that international companies have on Australian gold resources - estimated by Dr Close to be near 60 per cent - highlights the global nature of the current gold boom.
Gold production from the world's mines hit a record high in 2010, when 2689 tonnes was taken out of the ground.
The tally eclipsed the previous record set in 2001, and another record is predicted for this year, with forecasts suggesting global production will grow by 4 per cent.
West African nations such as Burkina Faso are fast joining the ranks of China, Australia, Argentina and the US, aggressively expanding their gold production in an effort to satisfy a demand that is growing from a range of sources.
Part of the demand story is familiar: the growing middle classes in India and China have a taste for jewellery, and they seem to want it made from gold.
A recent report by London-based precious metals consultancy GFMS revealed that demand for gold jewellery rose by almost 40 per cent in China between 2001 and 2010. In India, demand grew by more than
20 per cent.
Other factors driving demand for gold are far less familiar: after spending the period between 1997 and 2009 as net sellers of gold, the central banks of the world have started buying again.
Hedge funds and pension funds appear to be following suit as investors seek the security of gold amid a perfect storm of political unrest in the Middle East, sovereign-debt problems in Europe and a plummeting US dollar.
Earlier this month, the University of Texas's $20 billion endowment fund revealed it had taken possession of 6643 bars of physical gold bullion.
The billion-dollar purchase, now secure in a vault below New York City, represents 5 per cent of the fund's value, and analysts say the implications could be huge if other pension funds follow suit.
''It is being treated as a currency again and it is significantly under-owned,'' Mr Kaleel said.
''If gold is going to become a conventional portfolio holding for pension funds and central banks of 5 to 10 per cent, there is a lot of gold that needs to be bought.''
The latest noises from the US Federal Reserve suggest the drive to gold is not misguided.
Speaking on Thursday morning Australian time, Fed chairman Bernanke indicated there was no end in sight to the massive stimulus effort under way in the US. Interest rates will stay close to zero for an
''extended period'', and the funds spent buying back Treasury securities - more than
$US2 trillion - will continue to be pumped into the American economy beyond the end of the current round of buybacks.
The policy is expected to further undermine the ailing greenback. If it does, it can only mean a higher US dollar price for gold.
Against that backdrop, it's hard to find anyone predicting the gold price will retreat any time soon.
Tony Parry from Resource Capital Research says current conditions represent a
''win-win'' for continuing strength in gold, but gold could be pulled closer to earth in 2012 if there is a sustained recovery in the main equity markets.
He points to some recent selling-out of gold-focused exchange-traded funds (securities that track the performance of the gold price) as evidence that some investors believe gold has reached the top of its range.
The ETFs have proved popular since they came into vogue about five years ago, but flows out of the funds were noted in late 2010.
The best-known gold ETF - New York's SPDR Gold Shares - was holding 1280 tonnes of gold for its investors at the start of the year, but is now holding 1230 tonnes.
''The investment flows (in ETFs) have switched from soaking gold up to releasing it on to the market, so we think that shows a bit of a shift in investor sentiment ? that's a significant factor to make us more cautious on the sustainability of the current investment demand for gold,'' Dr Parry said.
But Goldman Sachs and PA analyst Ian Preston doesn't believe the flow out of ETFs is a portent of things to come. ''I don't think it's a trend,'' he said.
Mr Preston would not be surprised to see the gold price stay close to $US1500 for the next 15 months at least.
''We are not in the camp that calls a $US2000 gold price, but as long as people are trying to protect their wealth, you continue to have central-bank buying and you have low real interest rates; those are all recipes for continued strength in the gold price,'' he said.
Speaking in New York, Euro Pacific Capital senior economist Michael Pento recently told Bloomberg that a breach of $US1600 an ounce would be achieved in 2011, while the GFMS experts in London have predicted a top as high as $US1620 this year.
''Market imbalances suggest that at some point the gold price will have to retreat,'' the GFMS report says. ''Nevertheless, this is most unlikely to occur on a secular basis in 2011 and potentially not until well into 2012.''
Fourteen years after he wrote off gold's place in the global economy, Peter Costello did not respond this week when invited to reminisce about the 1997 selloff.
But in an attack on the Gillard government's handling of the mining boom - published in The Age this week - he showed the sharp rises in commodity prices had not escaped his attention.
''We are not in normal times,'' he wrote. ''We are living through a period of unprecedented prosperity in Australia's terms of trade. This is bigger than the gold rush of the mid-19th century.''
Those 19th-century gold rushes occurred at a time when currencies were tied to a formal gold standard. After the credit crises of recent times, Mathew Kaleel reckons we can learn something from our past.
''It worked for 3000 years and the current system has not worked for 30 years,'' he said.
''If the only reason to reintroduce something, whether it's a gold or another type of standard, is to limit leverage, it would be a very good thing.''
