RE: RE: MTO Bottom : TAThere have been a number of posts in the last 24 hours, raising conflicting values on a realistic value for Metanor. Also, there have been references to other producers such as Alexis and earlier, Timmins. I come from an accountancy background and it is generally accepted that company balance sheets are more of an art than an exact science, as is the valuation of any commercial enterprise. The points that I believe ought to be taken on board when considering Metanor, include the following:-
1. Since Metanor cannot yet be included in the category of a commercially producing company, then any valuations based on earnings or capitalisation per ounce of gold production cannot be applied to Metanor at this time. 2. Metanor is more akin to a hybrid between an exploration company and an embryonic producer. Capitalisation is required to transform the known assets to profitable earnings. In such situations, a rough benchmark valuation that is often used is to value a company based on 10% of the value of the ounces in the ground. 3. With regard to Timmins, this appears to have successfully entered the profitable production phase and also has large development properties near the Goldcorp Penasquito mine in Mexico. The positive attributes that Metanor has when compared to Timmins, appear to be the politically safe location and also, at Barry, an open pit resource which appears to be on course for producing a gold grade far more attractive than Timmins open pit, where gold grades of less than 1g per ton are being mined profitably, due to high volumes.
It seems that Metanor could be realistically valued by way of ounces in the ground, Although the share price is being depressed as a result of the unacceptable 43-101 delays. Whatever share price re rating eventually takes place after the release of the 43-101, a full value of Metanor will only be possible to determine, when it becomes clear how the company plans to develop one, or both, of its key projects.
At the present market cap of about $65m, this is less than the $69m capital put up by investors since the company was formed (excluding the recent flow through shares). Therefore, at a valuation based on 10% of the value of gold in the ground, at a price of $1,200 per ounce, the present $65m market value equates to about 540,000 ounces in the ground.
Before release of the impending the Barry 43-101, Metanor’s published Measured, Indicated and Inferred reserves and resources amount to 998,824 (Source: company reports), which includes only 52,300 indicated and 126,600 inferred at Barry. Since Metanor has been fully equity capitalised to date, then the above resources are not subject to pressure which could arise, if the company relied on debt financing costs.
Therefore, although the share price could drift lower, there are powerful fundamentals which could propel it to the upside.
Raffles