Can a valuation estimate be both wildly optimistic and grossly pessimistic at the same time? Yes. The first properly detailed FDR resource modelling attempt that I’ve yet seen was proposed by Ensure_Max on CEO.ca today, and it actually fits that description quite well.
First the unwarranted optimism. Respectfully, I don’t think 7 grams of gold per ton, or even 5g/t, is a reasonable grade expectation. Probably more like 2 or even just 1.5. I think Great Bear was in that neighborhood, and it did just fine for shareholders. Sure, any rich veins will pull the average up, but it would take a lot of spectacular veins to achieve 5g average grade over such a large volume of underground space.
Maybe trim back the total surface footprint a little, too. So, Upper Antino might now stand at (400m x 175m x 150m depth x 2.7 tons per cubic meter of rock x 1.75g Au per ton) / 31.1g per oz = ~ 1.6 million ounces of gold. But hold on...
Ensure_Max’s (perhaps unintentional) “pessimism” more than offsets any grade distortion from rose-coloured glasses. He reckons only with Upper Antino. Take a look at pages 8 and 12 of FDR’s December 2023 corporate presentation:
https://www.fdrmetals.com/_resources/presentations/corporate-presentation.pdf?v=0.964 While there are enticing slides throughout the deck, these two pages in particular make tantalizing use of FDR’s auger (surface) sampling record.
Specifically, in the auger results map Buese looks to have a much larger surface footprint indicated than the one at Upper Antino so far. Substitute, say, 1,000m x 450m into my Upper Antino calculations (again trimming the map-marked dimensions a little to be conservative) and you get ~ 10 million oz Au at Buese alone. Outstanding.
And we’re not done yet. That 5-kilometer gap (gold trend) between Upper Antino and Buese is likely worth something as well. Probably not the same grade per ton, but large portions of it might still be economical for an open-pit. Assume only 50% of the volume of its rock contains an economical 1 gram per ton, and cut the width of the surface footprint to half of the Upper Antino dimension for good measure too. This gives: ([5000m x 87m wide x 150m deep x 2.7t/m^3 x 1g/t] x 50%) / 31.1g per oz = ~ 2.8 million oz Au in the gap area. Not too shabby.
But wait – there’s more. The auger map makes the Parbo Zone and the Lower Antino Zone look substantive too. Together, these two separate zones might add up to perhaps one Upper Antino Zone. Therefore, throw on another 1.6 million oz.
What kind of resource does that all suggest? 1.6 + 10 + 2.8 + 1.6 = 16.0 million oz. For the first 150 meters of depth. Plus, don’t forget, this leaves out another 1 million oz (or more) to be easily obtained from the surface tailings.
Buyout price implications? At Cdn$75/oz, and, say, 80 million shares fully diluted at takeover date, FDR’s 75% share of the project would come to ~ Cdn$11.25 per share.
And factor in some kind of enthusiasm premium if gold prices are also well into record territory by that time. Who knows, maybe the gold price goes high enough to trigger a bidding war for our company? There's no fever like gold fever. Has anyone else got an excitement headache yet?