RE: BBR vs GBB“What must also be remembered is the industry avg. is over $105 per oz anywhere in the world for gold and Osisko currently gets $400/oz whereas other Ontario/Quebec companies like Lakeshore receive over $850/oz for their Proven/Probable Reserves. Valuing us at only $20 an ounce right now in Quebec is far too conservative for what we've shown the market.”
The problem I have with the $105/oz average in the world is that is for all Au companies and that doesn’t take into account the classification of resources or the political risks of the countries those deposits are in. It just lumps everything together. When looking at GBB I’m talking about a specific deposit in a specific jurisdiction. And I’m talking about inferred ounces so there is no point to bring up what Osisko is trading at or any other company that is about to produce and has P&P reserves vs. the 100% inferred resources GBB is after. They are different animals that are 3-4 years ahead of where GBB is at in their mining cycle. It’s an apples to oranges comparison.
Most analysts only use a $35/oz metric for inferred Au oz prior to a resource report as they want to hedge their bet that there assumptions on the size are wrong. So the current GBB valuation isn’t that large a stretch as no one knows exactly how much Au in on Granada at this time. The $20/oz estimate you used for GBB could be higher or lower than that, but it will only be clearer in time when that report comes out.
The Brett Resources comparison is a good one due to the size and type of deposit as well as it being at a similar mining stage to GBB. But remember that when Osisko took them over it was at a 52.5% premium (for $58/oz) to the 20-day moving average of Brett. So prior to that Brett was trading at $38/oz inferred with a 43-101 report in hand. And I’d argue that the Brett deposit had 3 things going for it then that Granada probably won’t have in their initial 43-101 report when it comes out that makes Brett more valuable at a similar stage in both of the companies’ similar stages.
1) Brett’s average inferred grade was actually 0.8 g/t (not 0.7g/t) at a 0.3g/t cutoff vs. GBB’s probable 0.5 g/t at a 0.2 g/t cutoff. Markets always pay more for higher-grades.
2) Brett’s deposit had 97% mineralization within 300m from surface vs. GBB that is drilling down to 450 m. This is important as the 320-350m is about the deepest you can go for an open-pit mine. After that the grade needs to be a lot higher as the economics for underground mining are far more costly. If those grades are not high enough, anything under 320-350m never gets mined and never gets placed in a resource report as the report is only for the economically viable ozs at the current commodity prices. So almost all of Brett’s resource was within the limits of the maximum depths of an open-pit deposit vs. GBB that is not. That makes Brett’s deposit more valuable as it has a greater clarity that almost every oz in their report will be mined a low-cost (open-pit). GBB will as well, but only up to 320-350m deep. After that any mineralization deeper that is not higher grade than say 1g/t is in doubt of being economically viable to mine.
3) Brett had 6.7mm oz inferred at the time of their report. GBB will probably be in the 4mm oz range. Usually the greater the size of a deposit, the lower the operational costs that deposit will have. Even Frank Basa has said the same thing in his last webcast interview with Jay Taylor. The markets pay a higher multiple for that as well.
Now with those 3 advantages in hand and Brett being a star stock in 2006, Brett was trading at $38/oz inferred when Au was $700-750/oz. So today similar deposits should trade at a higher valuation and they do.
If you want to use $100+/oz in your calculation then go ahead, it doesn’t mean anything to me. But I don’t see any analysts going out of their way to use those metrics in valuing a company today based on inferred oz with an eng report in hand.