Repost of Johnytest's Oct 25th
I read this last night, and thought it would be good to repost it. Well done.
Below is his post:
Let me start by stating that since my expectation on block J were not out of whack, I was not negatively surprised by the results ... and since I came up with these expectation based on my valuation of AFA, according to the facts published by the Corporation and not the rumors of anonymous poster on BB on stockhouse and Borssnack ... I was also aware that they may be a negative reaction when the news would come out, but once the truly weak hands will be finally out then we can attain our true valuation..
Having been an investors for a long time I remember that, before the program, AFA did not have any inferred resource, but only a potential of between 700,000 Ct (at a grade of 0.057 ct per square metre) and 1,8 million ct using the best 20% results grade of 0.145 ct per square metre has a guideline ..
So when you combine that with the fact that the objective of the sampling program was to establish Inferred Resources over a part of the previous areas of potential mineralization and to revise the potential mineralization of the remainder.
I cannot come to any another conclusion that the AFA actually did what they said they will do...
They may not have hit the grand-slam home-run you were looking for, but the did hit a solid double and they are still in a position to score big..
You may not see the value but I do., and this is why:
First,
I actually took the time to read the complete press releases, the technical reports and not just the highlight .... and from the information, I understood the meaning of the following statement:
“an Inferred Resource of 154,000 carats in a 1.72 square kilometre Area” means that the inferred resources is based on just 5 % of the total potential of Block J (1.72 SQ KM / 39.1 SQ KM ) ...
And were you question the value of the results, I see the long term potential, (from today the press release);
The total estimated Inferred Diamond Resource in Feature 8 is 154,000 carats in 1,720,000 m², at an average grade of 0.09 carats/m². Within the blocked-out area there is a 78,000 carats higher grade zone, measuring about 400,000 m² with an average block grade of 0.20 carats/m². Geophysical survey data indicate that areas similar to the high grade strip in Feature 8 extend to the northern end of Block J for over 20 kilometres. Furthermore, the high grade strip seems to connect with Feature 6.
The highest block grade estimate is 0.25 carats/m² which, when compared with individual samples that intersected grades up to 0.75 carats/m², illustrates the smoothing effect of making estimates in blocks, whereby higher grade areas are “diluted” by lower grade areas within that block. The location of the estimation blocks and the estimated grades are shown in Map 1.
Application of the sampling results to the revised geological models outside the area of Inferred Resource indicates a potential for a further 1.2 million carats at a grade of 0.03 carats/m2 to 1.5 million carats at a grade of 0.04 carats/m2 in Block J. Map 2 shows areas that are considered to have potential for the development of further Inferred Resources. Sampled areas are shown in various shades of green and unsampled areas in blue. The area of declared Inferred Resources is also shown in Map 2.
...The present sampling program used a fully efficient vessel and equipment and therefore the current estimates should be regarded as far more reliable than previous estimates. It should be noted that the higher grade portions of the Inferred Resource exceed the grades cited previously. Therefore there is a strong likelihood that higher grade areas will be discovered within the overall envelope suggested for further development work, especially in the thicker Terrestrial-Colluvial sediment areas along the edge of the Basement outcrop and possibly in Feature 6.
Second,
For me, the results found in the report means that there is room to growth the inferred resource of AFA on Block J... and I would not be surprised if, when all is said and done, that they will have delineated one Million Carat reserve on Block J.
Unfortunately, while one million carat is still good, it is clear that Block J is no longer the blue sky potential project of AFA...
But still, using the new number found on the AFA PP presentation whereby One Million Carat could be worth $ 0.60 per share as a baseline, I estimate that the value of Block J should trend toward that over time has more potential is added to the inferred resources...
Now, what is my minimum valuation of AFA today:
Block J inferred resources: 154,000 ct... = (0.154 *0.60) = $ 0.095, without giving any value to the new potential...
And furthermore, that does not give any value to 1% NSR of the TECK HAIB project, which could be easily worth another $ 0.08 per share...
So even before giving any value to the new concession, we see that AFA project should be worth presently $ 0.175 per share..
Third,
For me the blue sky potential of EPL 3403 is huge.. just reading the press release on the subject:
EPL 3403 is contiguous with ML 128(C), and is close to ML 43 and ML 44. Namdeb recently announced that it will spend US$ 175 million to increase the diamond resources in ML 43 by 68 million carats. Thus EPL 3403 is well positioned relative to surrounding properties.
Therefore Just assuming that AFA can delineated on EPL 3403 just 10% of what DeBeers is looking for, that would give us a potential for EPL 3403 of 6,8 million carats...
What could be the value of those carats ? I assumed that including the acquisition and financing to the economic model, the value of one million carat would become about $ 0.36 per shares...
Therefore my valuation become $ 2.88 per share of AFA....
Block J Inferred resources 154,000 ct .. (0.154 * 0.36) = $ 0.055
Block J Additional potential 846,000 CT (0.846 * 0.36) = $ 0.30
EPL 3403 Potential 6,8 million ct (6,8 * 0.36) = $ 2.448
1% NSR of the TECK HAIB project, = $ 0.08
Now let be very clear, I am not saying that the value of AFA should now be $ 2.88, what I am saying is that, once the panic is over, people will realized that the potential value of AFA is way above the present market price of $ 0.06 and that the price of the stock should start trending toward these valuations over time...