Sino Gold vs High River GoldEldorado Gold currently owns 20% of Sino Gold.
Eldorado Gold made an offer this week to purchase the remaining shares of Sino Gold. This transaction offer values 100% of Sino Gold at C$2.0 Billion. High River Gold’s market cap is only C$220M, representing a disparity that is almost C$1.8 Billion below Sino Gold’s transaction value. Meanwhile, High River Gold has a near-term (annualized) run rate production profile that is 80,000 ounces (300K HRG vs 220K Sino Gold) higher than Sino Gold’s profile.
Enterprise Value (EV) = Transaction Value or Market Cap + Debt - Cash
EV per production oz = EV / annualized near-term production ounces (represents annual, not quarterly)
Sino Gold’s EV per production oz = C$9,235
High River Gold’s EV per production oz = C$1,108
If High River was recognized similar to Sino Gold, High River’s share price would be $4.27.
$9,235 * 300,000 attributable High River production ounces / 649,100,000 High River shares = $4.27
HIGH RIVER GOLD:
*Operating region (s) – Russia and West Africa
*(attributable) near-term production – 300,000 ounces
*(attributable) estimated production in 3 years – 500,000 ounces (99K near-term Berezitovy, 90K near-term Taparko, 120K near-term Zun-Holda-Irokinda, 21K more ounces from Berezitovy @ 100% utilization, 36K more ounces from the Taparko Expansion Program and 134K ounces with Bissa in production = 500K ounces)
*Cash Operating Cost per oz - US$425 (my estimate once operations have stabilized, US$414 actual was posted in Q1’09, US$497 in Q2’09)
*(attributable) P&P Reserves – 2.2M ounces (High River’s Reserves and Resource ounces have been severely understated due to conservative Russia rules – the current gold price is US$955, but Zun-Holda’s and Irokinda’s ounces have been calculated using a gold price of US$550, Berezitovy’s ounces have been profiled based on a US$400 gold price, and Prognoz’s silver price is likely extremely low as well)
*(attributable) Total Resource (includes Reserves) – 6.6M ounces (severely understated – see note above)
*Cash - unknown
*Debt - From HRG’s July 16’09 NR: “High River's total consolidated debt outstanding was estimated at approximately US$ 103.9 million.” This translates to C$112.5M.
*Market Cap - C$220M
*Enterprise Value - C$332M
*EV per production oz (annual, not quarterly) – C$1,108
SINO GOLD:
*Operating region (s) – China
*(attributable) near-term production – 220,000 ounces
*(attributable) estimated production in 3 years – 400,000 ounces
*Cash Operating Cost per oz - US$400
*(attributable) P&P Reserves – 4.4M
*(attributable) Total Resource (includes Reserves) – 7.1M ounces
*Cash – C$162M (US$148)
*Debt – C$193M (US$177)
*Transaction Value - C$2.0 Billion
*Enterprise Value - C$2.0 Billion
*EV per production oz (annual, not quarterly) – C$9,235