Posted onJune 5, 2014
Geologix Explorations is a gold & copper focused development company in Mexico. Despite success in de-risking of their main project Tepal the stock has fallen constantly the last three years. In the last weeks it has fallen to 0.05 cent, which gives a market capitalization of about $8,5 million. That gives a market cap per oz of about $2.
These are not any ounces, these are mineable ounces, economic ounces to mine, the mine is also permitted. To take those ounces out of the ground has a total all-in cost of about $500 at current prices, that leaves a net-income of $750 for every ounce mined. Still they are only valued at $2/oz. Absolutely amazing, the most undervalued stock I have ever seen.
What about management? Well, the president Dunham Craig was involved in the building of Wheaton River as vice president of exploration and corporate development. Another Wheaton River guy, Randy Smallwood is part of the mangament, he is now the president of Silver Wheaton. As advisor to the board they have another Silver Wheaton guy, Eduardo Luna which now is president of the Mexican producer Primero Mining Corp.
Here are some short facts about Geologix:
- Category: Guld, koppar & silver
- Cash: $1 m
- Resources: 4,5 moz au eq 1,8 moz gold, 809 Mlbs copper)
- Annual produktion: 116,000 oz au (243,000 eq oz with copper & silver)
- Cash cost after tax all-in sustaining: $492
- Start of production: 2017
- LOM: 11,5 years
- Capex: $354 m
- IRR at $1518/oz gold & $3,71/lb copper after tax: 34%
- NPV: $1,2 billion
The company needs more cash in order to finish the feasibility study, despite this they have turned down financing offerings since they believe current share price does not reflect the underlying value. They believe better opportunitys to finance will come in the near future. After financing is in place it will take about 4 months to finish feasibility and 8 months after that to start of construction. Constructions takes about 1,5 years.
Assuming the company reaches full production 2017 and a gold price of $1500/oz the potential net income will be $1500 – 441 * 116,000 = $123 million/year,that is absolutely stunning when you consider the market cap is only $8,5 million today, probably in my opinion the most undervalued gold stock ever.
‘Opportunity is a haughty goddess who wastes no time with those who are unprepared’