re: sale prices of gold projects INTRODUCTION:Normally, I...

re: sale prices of gold projects INTRODUCTION:

Normally, I would'nt compare the MOTO project with "AND" but it can be useful to find out about sale prices. Prices of good projects have moved up and it is not that cheap to buy a deposit.

1. THE MOTO PROJECT.
Briefly, MOTO (MGL, 98% owned by MOE) will have about 15/16 mill ounces by July 1 and MGL is entitled to 10 mill ounces of Gold.

The project will either be sold or Moto will mine it starting with some 250,000 ounce production or greater while later some 800,000 ounces/year from underground mining is envisaged.

2. THE "AND" PROJECT
This is a small scale enterprice and I am quoting from Post 923562 (Quin's article):
" Southern Cross said Cerro Negro looked commercial, estimating an initial resource of "probably over 500,000oz, say 4 to 5 million tonnes grading around 3.5gpt".

It claimed this would support a 75,000oz per annum operation producing gold at less than $US200/oz, and that such a resource could be attractive to other players in the district, including Canadian-Peruvian company Minera Andes – which has been developing a nearby silver-gold project.

However, Southern Cross also said "the real opportunity" is that the Cerro Negro deposit could move towards the 1 million oz size with further drilling – and that 2-3 additional vein targets could potentially have another 1Moz "or more" – underpinning a 120-150,000ozpa operation".

Comment: Let us set this at 0.75 mill ounces bearing in mind that still a lot of drilling needs to be done.

The current share price is 38.5 cents. There are 268.3 mill shares and 34 mill options. I'll only include the 2006 and 2007 year options and consider these as converted,

That increases the shares by 19 mill to 287.3 mill.

The Market cap is $A110.61 mill and one ounce of Gold Insitu according to the market is $A147.48 or say $A147.50


3. PREVIOUS MOTO CALCULATIONS
From post 894221, this thread,
Extract:
Assume that the prospective sale value will be some $US75/ounce at a Gold price of US$550 and a 2.7 gr/tonne gold grade for the MOTO project.

The MOE options will be exercised in May; there are some unlisted Options and warrants to convert at some time, a grand total of 273.1 mill shares, say 275 mill shares (diluted) when the offer is made.

They reported 11 mill ounces on 14 Nov and were drilling extra ounces at a rate of 1 mill ounces/month or 3 mill ounces in 3 months.

I don't think that 16 mill ounces on 1 July 2006, will be a problem. If they continue drilling that may increase further; they may do that to advertize the size of the resource and the price goes up with the size of indicated/measured resource.

Let us assume that they will have 15.88 mill ounces; MGL, MOE's 98% subsidiary will be entitled to 10 mill ounces of that according my previous calculations.

MOE has 98% of MGL, so the value to MOE could be: 0.98*10 mill ounces*US$75 or US$735 mill or A$980 mill (A$=0.75US$)

That is A$3.56, say $A3.50 per MOE share (Fully diluted).

4. SUMMARY.
Right now, MOTO has about 13 mill ounces of indicated and measured resources. AND has none except for the estimated inferred 0.5 mill ounces. I have credited AND with another 0.25 mill ounces till 1 July when MGL will have some 10 mill ounces but they can drill for more.

AND is looking for 75,000 ounces per year and MOTO will start with 250,000 +.

The suggestion is made that AND could increase production to 120,000 ounces later while MOTO mentioned 800,000 ounces/year.

Item 2 shows that one ounce of "AND" Gold insitu will cost A$147.50 while item 3 set the MOTO price per ounce insitu at US$75 or $A100.00. (F=0.75)

AND has slightly more shares but the grade is somewhat higher.

Item 3 mentions that the value of the MOE share price based on a US$75 is $A3.50.

I feel that this MOE share price is too low and ought to be between A$4 and A$5 if Moto were sold on 1 July.

Subject to audit,

Gerry
Readers, please do your own research and you decide if and when to buy, hold or sell any stocks or metals/commodities.