page 19In terms of valuation for exploration/development properties, it is difficult to
assign values to exploration/development properties with any certainty. The
expected cash balance is the simple part. We expect MAX to have $4.5 million
in cash ($0.21 per share) in a year. We have looked at the Company’s two
leading project to look for potential value, leaving the smaller or less
developed assets as additional upside. It should be stressed that the
Company does not currently have a 43-101 defined resource on any of its
properties, and this target valuation is speculative in nature.
The Gold Hill molybdenum project was initially thought to reside under a 700
by 800 meter magnetic anomaly. The mineralization has been found basically
from surface to 1,000 feet of depth. If we use those dimensions for an
exploration target, we get a potential resource of 168m3, or about 450 million
tonnes. Using a similar economic regime as Moly Mines’ Spinifex complex
(469 million tonnes of measured and indicated resource at 0.057% Mo) for a
target comparable, we can see that the exploration target is large enough to
be significant. Rudimentary math gives us about 320 million pounds of
molybdenum if the Company can prove up average grade of 0.05% Mo
throughout the initial exploration target zone the rock would have a gross rock
value nearing $10b. Again approximating Spinifex economics, if we grant $1b
for capital cost and $7 per pound mining costs, the gross value could still
exceed $7b. Given time value and risk probability of the deposit ending up
economic, we have deeply discounted the potential value to 1/10 of 1% of the
possible gross value, to get a rough value of $7 million for the project, or
$0.34 per share. Obviously, this is a speculative valuation, but the point
remains that this has the early signs of a large mineralized resource starting
at surface. Early drilling this season has indicated that the mineralized zone
may extend beyond the magnetic anomaly as first suggested.
The C de Baca property contains what Oxymin had previously suggested was
an exploration target of 1.67 million tonnes of 0.18% U3O8 (equivalent to
6,000,000 pounds of uranium). As mentioned before, the exploration was done
prior to 43-101 regulations, so the findings do not represent an official
resource. However, as Oxymin had drilled over 216 holes to gather their
information, we feel it should not be dismissed out of hand. A potential
6,000,000 pounds of U308 would have a gross resource value of about $300
million in the ground at $50 per pound. If we assume a 10% yield from
extraction, the mining value would be $30 million. Again we have discounted
this significantly for risk factors/time value etc. If we grant 5% of the gross
mining value we arrive at a property value of $1.5 million, or $0.07 per share.
At $1.5 million value for the potential resource, if the historical work is proven
accurate, the uranium is valued at $2.50 per “pound in the ground”.
Cash 2009 $4.5 million $0.21 per share
Gold Hill $7.3 million $0.34 per share
C de Baca $1.5 million $0.07 per share
$13.4 million $0.62 per share
Please do your due diligence
Cheeers