Nice Spec Play
.32 per share as of 10/14/2010
151,160,692 fully diluted shares (all in the money)
$48,371,421 Market cap
531,422 M&I oz
Average 46,000oz production per year
11.5 + year life of mine
Thanks to TheRock07 for indirectly pointing BZA to me. The low capex, robust IRR, and extremely high grade ore convinced me to buy my first tranch of shares. Here is my attempt at establishing conservative operating cash flows and target prices for the next two years using $1250 gold and an OCF multiple of 5:
2011
($1250/oz - $500/oz cash costs) x 25,000oz = $18,750,000 OCF
[5 / ($48,371,421 / $18,750,000)] *
.32 =
.62 target price
2012
($1250/oz - $400/oz cash costs) x 55,000oz = $46,750,000 OCF
[5 / ($48,371,421 / $46,750,000)] *
.32 = $1.55 target price
Of course the price, costs, ounces, and multiple applied will vary as more information becomes available. Everyone should do their own DD and note that grades mined will be lower beyond 2014 so costs will be higher too unless more higher grades are intercepted. Also, proving up more ounces will be important in expanding the mine life and possibly production going forward.
The only concern I have is with the remaining financing of the project. To be honest, I think management could have done better by not issuing so many shares (history shows they are not the best financiers). With such a high IRR for the project, they should be pushing for debt or at least a gold loan. Once this issue is resolved, I think the stock will see further price appreciation to close the valuation gap and maybe I'll by a second a second tranch of shares.