Gold Stocks Information and Comparison

[explod]

Strange situation atm. Since sub prime there has been mass return to fundamental analysis..ie first criteria a company must actually make money! So we have the gold producers increasing s/p and the gold explorers losing ground. There has to be at some point a correction to in ground values or else there will be no incentive to explore. Why invest in an exploration company only to see the resource sold of for a fraction it cost to larger miners? I wish I knew when this correction will happen because then we will see huge appreciation in s/p for explorers with known resources.

Yep, I wish we could know too. That would be the holy grail.

The market it self will guide you. When stocks begin to move up on volume is one of the best rules of thumb.

For me I keep my special worked out stocks on watch lists, some using broker alerts.

We have new investors moving into the gold sector who at the start will hit the blue chips. Sentiment will head to the exploreres as the gold message sinks in. And maybe it soon will, the Melbourne Herald Sun today has a lead busines article on the merits of investing in gold so stick with it, faith and patience is also required in this caper.

 

[JTLP]

So what are people's thoughts on the most undervalued companies in this thread so far? Based on the fundamentals and other factors.

I am currently in on Avoca, but they just can't seem to run with the price of gold (maybe when they produce they will have more stability and sp increase).

I liked the looks of NAV and PRU, but PRU had me worried about its location (Africa), and some days of lacking volume. Both NAV and PRU are expecting drill results soon though.

Can anyone see a comp they think is fairly undervalued, and with solid support?

 

[Sean K]

Can anyone see a comp they think is fairly undervalued, and with solid support?

JTLP, I'm leaning towards anything in production and unhedged to take advantage of the current price increases. Not necessarily simply 'undervaled on MC to oz au.'

They should naturally command a higher valuation in these terms, in this environment, especially when future equity may be hard to come by for development. So, big resources and good cash flow are probably better investment options at this time, IMO. So, I'm only really looking at the top couple of producers who are earning, for value.

However, for multibagger short term trading potential, I haven't seen too many on this list. And, perhaps they shouldn't be, because we're after a JORC to determine 'value'. The true multibagger is one that is exploring and comes out with a resource to the massive upside.

From this list, there are a few, but still very spec, and almost impossible to 'compare' as the title of the thread requires....

 

[jman2007]

I think its important to make clear distinctions between producers
(cash flow positive) and explorers (cash flow negative)

refined silver...FNT - Frontier Resourses.
seems way under value with a JORC resources Au - 2.7m oz
and a cap of 15mill.

can u elaborate on why there cap is so low?

Well I don't think it is so simple as that,

Many producing mines will still be cashflow negative in the first 1-2 years of production, they could commence mining and 6 months of ore stockpiling beofre any production even takes place. Toward the end of mine life many companies will treat lower grade "waste ore" or tailings to recover lower grades, and you can almost guarantee that they will be cashflow positive by then.

It still looks like there is a steady trickle of info coming in for Kennas to compile, I might re-assess my submitted data just to double check everything is accurate and I'd urge everyone else to do the same, so we can have an informed discussion.

jman

 

[JTLP]

JTLP, I'm leaning towards anything in production and unhedged to take advantage of the current price increases. Not necessarily simply 'undervaled on MC to oz au.'

They should naturally command a higher valuation in these terms, in this environment, especially when future equity may be hard to come by for development. So, big resources and good cash flow are probably better investment options at this time, IMO. So, I'm only really looking at the top couple of producers who are earning, for value.

However, for multibagger short term trading potential, I haven't seen too many on this list. And, perhaps they shouldn't be, because we're after a JORC to determine 'value'. The true multibagger is one that is exploring and comes out with a resource to the massive upside.

From this list, there are a few, but still very spec, and almost impossible to 'compare' as the title of the thread requires....

Thanks Kennas. That's why i picked up AVO, not too long to production which should help it along a bit. In these current climates it's difficult to assess when a company will go from explorer to producer. It seems a lot of smaller companies (i think MUN) are about to produce, but i'm not too sure on the effect to the SP. JMan2007 i agree, all data needs to be looked over and assessed for a really indepth/quality discussion, not just ramping.

 

[jman2007]

JTLP, I'm leaning towards anything in production and unhedged to take advantage of the current price increases. Not necessarily simply 'undervaled on MC to oz au.'

They should naturally command a higher valuation in these terms, in this environment, especially when future equity may be hard to come by for development. So, big resources and good cash flow are probably better investment options at this time, IMO. So, I'm only really looking at the top couple of producers who are earning, for value.

However, for multibagger short term trading potential, I haven't seen too many on this list. And, perhaps they shouldn't be, because we're after a JORC to determine 'value'. The true multibagger is one that is exploring and comes out with a resource to the massive upside.

From this list, there are a few, but still very spec, and almost impossible to 'compare' as the title of the thread requires....

Lol Kennas....:iamwithst

Agreed, we might not have opened up a can of worms here but rather an entire worm farm. We might have to start another website called "ASF Gold Stock Comparisons" or something. Given the multitude of factors, you're probably right in predicting that the true sleeping giants are the ones who will unexpectedly release a stellar result somewhere down the line.

Some of the bigger companies like Barrick, like to sit on the sidelines and let a company do all the work in determining a resource and then simply come in and purchase the project. Potentially some of these companies could market themselves as a takeover target as well....

jman :

 

[refined silver]

I think its important to make clear distinctions between producers
(cash flow positive) and explorers (cash flow negative)

refined silver...FNT - Frontier Resourses.
seems way under value with a JORC resources Au - 2.7m oz
and a cap of 15mill.

can u elaborate on why there cap is so low?

1. Because exactly as you say there is a difference between explorers/developers and producers and even within those categories a difference.

2. The CAPEX is bigger than what the market expected -so recently the price dropped.

3. Issues over the Kokoda trail, but the mine if goes ahead won't touch it, and it only goes close to a 1km section of a 90km trail. This has been overblown to me, is not a real reason, but has kept investors away

4. It really is undervalued im my opinion, which is what value investors like me look for. (But even though good, its certainly not the most undervalued at all.)

 

[jman2007]

However, for multibagger short term trading potential, I haven't seen too many on this list. And, perhaps they shouldn't be, because we're after a JORC to determine 'value'. The true multibagger is one that is exploring and comes out with a resource to the massive upside. ...

A good example of this would be Barra Resources (BAR) recent ultra-high grade hits in the Coolgardie region at their Burnanks Project, which included 4.69m @462.1 g/t and 0.21m @10,300 g/t... yes that is 10.3 kg of gold per tonne! Sp jumped from approx 27c to around 43c.

I believe this set some kind of record on the ASX.

Ramelius Resources (RML) also probably falls into this category, extreme sp volatility based on very high grade results only for the price to head south once a lower than expected Mineral Resource estimate was released to the market.

jman

 

[jman2007]

I liked the looks of NAV and PRU, but PRU had me worried about its location (Africa), and some days of lacking volume. Both NAV and PRU are expecting drill results soon though.

JTLP,

I currently hold PRU, there have been a few strange calls made by PRU recently, one being the decision to divest the Kyrgyz portfolio with an entirely new float, which didn't go down well with some people.... Essentially existing PRU holders were offered shares in the new float under a measley pro-rata entitlement, essentially you have to buy back what you already owned. Here's a sample from one irate flyboy.

Well troops, it came out after market tonight and my first impression is that PRU shareholders WILL NOT be happy.

No in specie distribution of shares in the new company to PRU shareholders - merely a pro rata entitlement - you have to pay to own what you already own!

Second, it's on a 1 for 7 basis entitlement up to 20m shares in total. PRU will retain approx. 42% ownership (just over 50% fully diluted - cute but is there a need?). There's also 2.5m shares in "seed capital" - why you might ask - who gets these shares? GOOD QUESTION.

Third, why is PRU seeking to raise CDN$50 million NOW when the level of dilution will be far less AFTER the inevitable RE-RATING once trading on the TSX. Higher the price = less shares issued......

I would have thought far better to list on TSX BEFORE the spin off - get the re rating then spin off in Canada....

Also, raise the CDN equity in stages as you need it - the DILUTION at current levels will be HUGE!!!

No doubt there will be some releases forthcoming to reinvigorate the stock but tough in the present market environment..... All in all, some very odd calls by the PRU team.

On the other hand, my current outlook on PRU is still reasonably hopeful, and yes, drilling results still outstanding from Dec 2007. Here's my latest take of the comapny:

Hi JTLP,

Yes sp is a little soft atm, if I had some spare cash I might even consider buying some more shares. Although I am still resonably bullish re PRU's performance in 2008. Good point re the pending drilling results and one of the Directors increasing his interest...

Between Sept06 and Sept07 PRU spent A$12.7M on exploration, a fairly impressive figure considering their market cap. At Ayanfuri for instance, 2Moz has been discovered in the last 12 months alone, and to top it off, PRU are planning an overall 50% increase in exploration and infill drilling during 2008, to 160,000m! A huge amount... Back to Ayanfuri, bear in mind 4 rigs are now on site.

I'd also be keeping an eye on Tengrela in the Ivory coast as well, currently 619,000oz inferred resource. The Sissingue East prospect geologically speaking, lies just to the south and along strike from the 6.4Moz Syama mine. PRU are of the opinion that Sissingue overall could potentially host 3+Moz.

I am really looking forward to the detailed feasibilities for Ayanfuri and Grumesa and production timetables, due out some time this year??

Well that's my little snapshot for now
jman

 

[So_Cynical]

Well I don't think it is so simple as that,

Many producing mines will still be cashflow negative in the first 1-2 years of production, they could commence mining and 6 months of ore stockpiling beofre any production even takes place. Toward the end of mine life many companies will treat lower grade "waste ore" or tailings to recover lower grades, and you can almost guarantee that they will be cashflow positive by then.
jman

My example was black and white...your talking about the Grey's

Theres alot of company's in that area...close to or begun production
but still burning cash....others that are fully funded to production.

All these factors will show up in the Market Cap.

 

[refined silver]

JTLP, I'm leaning towards anything in production and unhedged to take advantage of the current price increases. Not necessarily simply 'undervaled on MC to oz au.'

They should naturally command a higher valuation in these terms, in this environment, especially when future equity may be hard to come by for development. So, big resources and good cash flow are probably better investment options at this time, IMO. So, I'm only really looking at the top couple of producers who are earning, for value.

However, for multibagger short term trading potential, I haven't seen too many on this list. And, perhaps they shouldn't be, because we're after a JORC to determine 'value'. The true multibagger is one that is exploring and comes out with a resource to the massive upside.

From this list, there are a few, but still very spec, and almost impossible to 'compare' as the title of the thread requires....

You've touched on a few very important points.

1. Prod'n vs Resources - eg which is better co all other things being equal, 5m oz resource and 200koz/a prod'n, or 10m oz resource but only 100moz/a production? At the begining of a PM bull, production is king. Later in the bull, PM companies are not valued on income or P/E but are more valued as an asset company, hence resources become very important.

2. Unhedged is v. important. There is still a lot of hedging hidden out there, juniors in JV with majors who have non-recourse loans just one example.

3. There are some multibagger potentials out there, this can come as the sector gets re-rated or for ind companies as people suddenly "see" a company's value.

4. You might have mentioned it in a different post to the one quoted, but while great drill results often cause a price to fly, I personally prefer resources already there. Eg Take PGM - MC $37m - has over 2m oz Pt, and 50m oz PGM in Greenland including 10m oz Au. Why buy explorers with Market Caps of $40m with no resources when no matter how good their drill results they are not going to get within miles of resources like this? Same with $20m companies why buy without resources when for the same $20m you can get decent resources.

 

[tigerboi]

i like ngf 4th biggest asx goldie,got me in the january tipping comp.lead they

are a quality producer,heaps of cash & on the prowl for another mine,2nd

i fancy heg soon to start trial mining & drilling bigtime as we speak,3rd on

grades alone but still along way off is bmy grades out of brilliant well at the

eric prospect of 165 g/t,at bohemia they hit 218 g/t,& 404 g/t @2.4m yep

thats 404 big ones in an 18 km shear zone all to themselves surrounded by

finds of 2m,2m,3m,5m oz finds north east of the old sons of gwalia mine,

brumby looks to have a huge amount to mine,now in 2nd phase drilling of

those huge grades,up 15% on friday so more likely of big grades again.....

 

[Miner]

i like ngf 4th biggest asx goldie,got me in the january tipping comp.lead they

are a quality producer,heaps of cash & on the prowl for another mine,2nd

i fancy heg soon to start trial mining & drilling bigtime as we speak,3rd on

grades alone but still along way off is bmy grades out of brilliant well at the

eric prospect of 165 g/t,at bohemia they hit 218 g/t,& 404 g/t @2.4m yep

thats 404 big ones in an 18 km shear zone all to themselves surrounded by

finds of 2m,2m,3m,5m oz finds north east of the old sons of gwalia mine,

brumby looks to have a huge amount to mine,now in 2nd phase drilling of

those huge grades,up 15% on friday so more likely of big grades again.....

aTTACHED TWO reports - Bell Potters and ASX on HEG

 

[refined silver]

Gold juniors are almost the most undervalued they've been compared to gold for the entire 8 yr gold bull. If gold keeps going, when these juniors play catch up, should see real fireworks. IMO anyone throwing away good gold juniors at these prices will regret it. The only proviso is that you CANNOT have these on margin, they are too volatile and you'll be whipsawed out of your position.

 

[So_Cynical]

I topped up my only explorer holding on Thursday at a ridiculous price, about 17% less than when i got
in originally....SBS - Sub-Sahara Resources would appear to be
way under valued considering the Friday ann.

Infill drilling results confirming the very high grades of its Zara project
6m @ 89.62g/t...52 to 58 meters
4m @ 20.55g/t...10 to 14 meters
3m @ 34.98g/t...8.5 to 11.5 meters

The worst result from the 6 best holes drilled was 5.5 meters of 3.2g/t @ 0 meters

http://www.subsahara.com.au/reports/announce/2008/ASX-Release Zara 08-01-25 _final_.pdf

Theres so so so many under valued Jr's/explorers out there.

 

[Whiskers]

The only proviso is that you CANNOT have these on margin, they are too volatile and you'll be whipsawed out of your position.

Absolutely agree, refined silver.

I've taken to specialising in the small to med cap miners and although my position can go negative at times, I can afford to wait until the market recognises them and revalues accordingly.

By not being geared and not getting squeezed into cash flow trouble I have only sold one at a loss (not because I had to, but because I got frustrated and sold one day too soon ) and on completed trades have doubled my money.

Not a bad result, but I can now see where I can do much better.

 

[jman2007]

I topped up my only explorer holding on Thursday at a ridiculous price, about 17% less than when i got
in originally....SBS - Sub-Sahara Resources would appear to be
way under valued considering the Friday ann.

Infill drilling results confirming the very high grades of its Zara project
6m @ 89.62g/t...52 to 58 meters
4m @ 20.55g/t...10 to 14 meters
3m @ 34.98g/t...8.5 to 11.5 meters

The worst result from the 6 best holes drilled was 5.5 meters of 3.2g/t @ 0 meters

http://www.subsahara.com.au/reports/announce/2008/ASX-Release Zara 08-01-25 _final_.pdf

Theres so so so many under valued Jr's/explorers out there.

So what makes this Au play so "undervalued" compared to other players in the industry?...and how are you defining "undervalued"?

If you are simply comparing their MC and global resources against other companies in the sector, this will not be a reliable guide. For one, you have substansial geo-political risk in Eritrea, and to my mind, the exact level of Government involvement in any foreign owned mining operation needs to be clarified. While infill drilling results can look impressive, all they are really saying is that "we drilled out a known ore body where we knew there was mineralisation"...big deal.

The questions investors really need to be asking instead of oodling over drilling intercepts, is where the heck these guys are going to get their water from for a mining operation, and what/if any type of local infrastructure is there available? These factors will ultimately determine the success or failure of most operations.

jman

 

[So_Cynical]

So what makes this Au play so "undervalued" compared to other players in the industry?...and how are you defining "undervalued"?

jman...i define value very simply ....SBS Sub-Sahara Resources, Zara project

Gold 760,000 ozs (so far)
760,000 x POG 910USD = 691mill USD
cost per ozs to market (Approx) 350USD with 40% govt JV / SBS would get (approx) 255mill in profit

SBS Sub-Sahara Resources has
hard assets/cash 40 > 60 mill, including 3 other African JV's
debt = 0
Market cap 35mill......thats how i determine value....am i missing something?

you have substansial geo-political risk in Eritrea, and to my mind, the exact level of Government involvement in any foreign owned mining operation needs to be clarified.

Bollocks!...The Eritrean Govt has clarified the matter, and the geopolitical risk is way over estimated...after all 1 party govts are the govt of choice for the US state dept and CIA.

Eritrea has stable 1 party system of govt, no local insurgency or racial, religious problems.
http://en.wikipedia.org/wiki/Eritrea

While infill drilling results can look impressive, all they are really saying is that "we drilled out a known ore body where we knew there was mineralisation"...big deal.

I thought u were a Geo?...infill drilling is done to expand the resource within the known
mineralization...infill drilling provides confidence and confirms
consistency....i imagine its needed for JORC compliance?

The questions investors really need to be asking instead of oodling
over drilling intercepts, is where the heck these guys are going to get their water from
for a mining operation, and what/if any type of local infrastructure is there available? These
factors will ultimately determine the success or failure of most operations.

I imagine like all mining operations where theres no local water....errr they will bring it in...im thinking
trucks or a pipeline....how else would they bring it in?

And finally im thinking theres no way this wont go ahead...theres to much gold there thats to easy to get
at, (as the mineralization is at the surface in places) for the project to not move to production.

Plus the Eritrean Govt needs the money....they owe the Chinese heaps.

 

[jman2007]

jman...i define value very simply ....SBS Sub-Sahara Resources, Zara project

Gold 760,000 ozs (so far)
760,000 x POG 910USD = 691mill USD
cost per ozs to market (Approx) 350USD with 40% govt JV / SBS would get (approx) 255mill in profit

SBS Sub-Sahara Resources has
hard assets/cash 40 > 60 mill, including 3 other African JV's
debt = 0
Market cap 35mill......thats how i determine value....am i missing something?



Bollocks!...The Eritrean Govt has clarified the matter, and the geopolitical risk is way over estimated...after all 1 party govts are the govt of choice for the US state dept and CIA.

Eritrea has stable 1 party system of govt, no local insurgency or racial, religious problems.
http://en.wikipedia.org/wiki/Eritrea



I thought u were a Geo?...infill drilling is done to expand the resource within the known
mineralization...infill drilling provides confidence and confirms
consistency....i imagine its needed for JORC compliance?



I imagine like all mining operations where theres no local water....errr they will bring it in...im thinking
trucks or a pipeline....how else would they bring it in?

And finally im thinking theres no way this wont go ahead...theres to much gold there thats to easy to get
at, (as the mineralization is at the surface in places) for the project to not move to production.

Plus the Eritrean Govt needs the money....they owe the Chinese heaps.

Well I'll remember never to take any investment advice re African ventures from you my friend. Here is what Richard Corbo, advisor to the CEO of MDN (who withdrew from Eritrea) says about the country, and I might add he knows a thing or two more about Eritrea than yourself, or me for that matter. He doesn't hold much faith in your Chinese argument either I'm afraid.

“We don’t think the Chinese, whatever power or influence they have out there, will accept potential mining operations in which you invest and have to do everything from scratch. [China would say], ‘You’re trying to pay me with something that doesn’t exist, or it’s only potential.’

MDN drilled on the Haykota property in June 2006 on two targets. One hole returned 13 metres of 2.34 g/t Au at depths of 6 to 19 metres, including 3 metres of 3.52 g/t Au from 8 to 11 metres. Another hole returned 7 metres of 3.08 g/t Au at depths of 2 to 9 metres, including 2 metres of 9.03 g/t Au from 5 to 6 metres.

Since MDN’s withdrawal, only three foreign miners remain with projects in the country: Nevsun Resources [TSX:NSU; AMEX:NSU], Sunridge Gold Corp. [TSXv:SGC] and Sanu Resources [TSXv:SNU].

Corbo said MDN eventually decided to quit waiting on Eritrea after the company hadn’t seen any progress in nearly four years. Talks never made any headway, he said.

“We’ve been dealing with the minister of mines, and … discussions have always been very positive. They keep on saying to us, ‘Just be patient,’ and they never came through. The bottom line is that we simply cannot trust what’s going on up there.”

Alex Gorbansky, managing director of the Frontier Strategy Group, said Eritrea is a risky place for any miner.

“Eritrea is at the high end of the risk curve for the mining industry given unclear regulations, an authoritarian regime and the ongoing conflict with Ethiopia. Security is another major concern for Westerns ... The current risks in Eritrea and the dynamic situation on the ground make it off-limits to virtually all firms but those with the highest risk tolerance.”

Gee, sounds like a real blue-chip destination

Well if you read any of my earlier posts you will see what infill drilling is for, my point being that many companies will try to create false momentum by drilling out known ore bodies and word the results in a very "particular" way. You have to be carfeul how you interpret these results.

Lol, water accessibilty is one of the things that can completely destroy a project. Do you realise just how prohibitively expensive it is to haul water in by road to feed a mill?... you can't just conveniently package these issues as a "done deal", in my experience water haulage and suppply is generally one of the critical components a lot of juniors overlook. If you ever get to visit a producing gold mine you will see what I mean.

Now you finally might start getting the idea that labelling a company as "undervalued" isn't so straightforward as multiplying a few numbers together. You need to find out as much as you can, and find out about things you never would even have thought of before.

Well, I naturally expect you to disagree, but from a Geo who works for a gold company I can assure you these things matter. At the end of the day it's your money, so good luck to you.

jman

 

[Spaghetti]

4. You might have mentioned it in a different post to the one quoted, but while great drill results often cause a price to fly, I personally prefer resources already there. Eg Take PGM - MC $37m - has over 2m oz Pt, and 50m oz PGM in Greenland including 10m oz Au. Why buy explorers with Market Caps of $40m with no resources when no matter how good their drill results they are not going to get within miles of resources like this? Same with $20m companies why buy without resources when for the same $20m you can get decent resources.

This confuses me no end. People who chase gold hopefuls atm have no real need to take such risks. Juniors with proven resources sit there waiting for the re-rating with sound resources sometimes cheaper than explorers with only drill samples and huge risk. Grade is a very misunderstood concept from my little knowledge on the subject. I think many look at average grades of say between 1.5g/t and 2g/t and do not like so rush to buy a company that publishes higher underground drill results that look far sexier. However the shallow lower grade deposits are the success story of gold mining in Australia from what I can tell. I see no proof underground mining has cheaper costs, in fact seem to have more issues/costs/problems.

Mind you if drill results indicated high grade shallow deposits then worth a punt but how often does anyone find them? Seems odd to want to gamble on such a find when sound, very probably ecomomic resources are so under-valued atm and far less riskier. If POG and junior re-rating takes off these will be multi-baggers. Meanwile some will still be waiting on drill results.