RE: Let''''s be sensiblleGiven that we are gold bulls, we prefer to use gold’s 325 day moving average. Since inception of the gold bull the 325 day moving average has not been broken.
In most cases in estimating the fundamental value of gold companies, the buyer uses three primary valuations. The TCA (total cost of acquisition), the NAV (net asset value) and the AMC/oz. (adjusted market capitalization per oz./reserves+resources).
EURO's TCA at a $1.10/share for Patricia is $495/oz. This equates to a discount of 38.38% from spot. Again let us not forget the property is in Canada. The weighted average of acquisitions since 1994 as % of spot is 100%. The $1.10 per share offer is undervalued based on the latest data from Island Gold.
At $0.99 a share PAT is trading at a 41.21% discount to its TCA using a spot gold price of $670. Gold is now at $680 and climbing.
We expect another offer is in the works. Our educated guess is…it is coming from Northgate or Richmont.
Our investment group has analyzed and re-analyzed PAT and concludes a $1.10/share is much too low. We find it hard to believe the current management team can be this incompetent. Therefore there is no doubt something is brewing and EURO’s initial offer could very well be the channel to a fair offer.
In our opinion a $1.10 share equates to an undervalued and unfair offer:
The current NAV of PAT is US $60,840,080
A 1:1 price to NAV is US $1.57/share (Since 1986 the average price to NAV is 1.4 times).
The 1:1 PRICE/NAV at a $1.10/share CDN. is discounted by 61.86%.
NOTE: In calculation of Island Gold’s NPV at 0% discount we used a cash cost of $350/oz.
The TCA at a $1.10/share is $495/oz.
The weighted average of gold company acquisitions since 1994 as a % of spot gold is 100%.
The TCA is discounted by 38.38% from spot.
At a $1.10/share the AMC/oz. is $124/oz.
Industry Comparables:
Aurizion Mines: $375/oz.
Wesdome Gold: $348/oz.
Semafo: $ 208/oz.
High River $183/oz.
And Patricia Mining $124/oz…..
At a $1.10/share the AMC/oz. of Patricia’s Canadian assets is discounted from High River’s Russian and Burkina Faso’s resources by 47.58%. A market premium should be applied due to political stability and risk. A Deutsche Bank study indicated that North American gold producing companies were trading at an average 53% premium to NAV, versus 17% and 19% discounts for Australian and South African producers respectively.
COMPANY SPECIFIC DISCLOSURE: Our investors group is buying Patricia Mines and currently owns 2.8% of the company.
DISCLOSURE: We do not trade in and out of gold stocks; rather we buy percentages of the company and hold until the company is sold. We seek and buy undervalued non-hedged junior gold producers or near term (under 12 months) producers. We use a gold price 325 day moving average in all of our target price models. The information and opinions in this report is prepared by a private investors group. The reader should assume that our private investors group may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein. The opinions, estimates and projections contained in this report are those of a private investors group as of the date of this report and are subject to change without notice. We endeavor to ensure that the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, we make no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any loss arising from any use of, or reliance on, this analysis or its contents. The information in this report is not intended to be used as the primary basis of investment decisions, and because of individual investor objectives, should not be construed as advice designed to meet the particular investment needs of any investor. "