I want to start by talking about the value of the JerrittCanyon treatment facility. The replacement value of this singlefacility has been estimated to exceed $500 mm. In addition to the rawdollar cost of building this facility there is also an even higherbarrier in receiving a permit and approval from Nevada to build in thefirst place. Even if you could get the permit and approval, thetimeframe for having an operational facility would run somewhere around8-10 years.
Yukon has made upgrades to this facility which would increase thereplacement cost value. They put $150 mm into the facility. Yukonclaims that the JC treatment facility is in better condition than whenit was first built. One of the main improvements Yukon made waswinterizing the facility to keep it running 24-7 / 365. (In the pastthe entire JC production would turn off in the coldest winter months.)
This treatment facility creates a floor in the long term value forYukons equity, as its current market cap is approximately 700 mm. Astrong argument could be made that this single facility exceeds thecurrent share price of Yukon. *$500 mm value pre-improvements ($150mm)+ whatever value you would put on obtaining permits and waiting 8years.
This isn’t the only piece of property / equipment that has real value.So you can make a reasonable assumption that the non-metal assets ofYukon exceed the share price by a decent amount.
Some excellent work on Yukon’s metal assets have recently been shared byAbove Average Odds Investing and Classic Value Investors . These canbe seen here :
https://www.aboveaverageodds.com/2010/10/...
https://classicvalueinvestors.com/i/2011/...
*I would strongly suggest watching the video on the CVI link above.There are two 8 min interviews with the CEO of Yukon, Robert Baldock.
Yukon was facing bankruptcy when Baldock came in as CEO and along with atimely investment by Eric Sprott (of Sprott Asset Management) helped toturn the company around. Production had been shuttered when Baldocktook over. Less than 2 years later, production has exceeded 150,000 ozper year. Baldock states that production could exceed 1mm oz peryear by 2015.
At the current spot price of $1400 per oz, this is an annual revenuerate exceeding $1.4 Billion US$. The company currently has a $600 peroz cost to extract. Let’s assume a 15% increase in cost to extract onthe ramp to 1mm oz. $600 x 1.15 = $690. Using $700 cost to extracton $1400 spot would leave Yukon with $700 million in annual bring homecash. Remember the current market cap is around $700 mm US$. Isuggest that you look over the above links if you want more detail onthe production numbers. The numbers have been covered and provided bythese authors so I won’t repeat them in detail here. I would howeveradd that the drill results have been even more favorable since theseauthors posted their work.
Proprietary Emission Reduction Technology
High emissions of mercury was one of the main reasons that Yukon shutdown its production prior to Baldock taking over the CEOresponsibilities. Graham Dickson, the COO, has created a technologythat Yukon has used to massively reduce their emissions. The companyclaims to currently be the industry leader by a decent margin afterputting Dickson’s technology in place. They are 50% under the newmercury requirements and 98% below the SO2 requirements. This isimportant because they will be well within any new decreases in allowedemissions. Baldock stated that other miners will follow suite andYukon is leading the way. To give an example of the extreme reductionin emissions, Yukon has reduced their mercury emissions from 10,000 lbsper year to 10 lbs per year. This is a huge emissions advantage overother miners and only adds to the appeal for a potential takeover.
Exploration
The company is “re-starting” their exploration efforts. They have 25years of drill data they are putting into a database for the first time.The company feels they have very good prospects already under theirownership. They will be using the newly constructed data base toproject areas of interest for future exploratory ventures. Nevada isone of the best gold producing states here in America….so Yukon issitting on a very prime location.
I feel that Yukon currently offers investors with a very high margin of safety.