A Sweet Spot To Be In !! just thought I would post what IR Firm sent out 1st week of Sept.
Looks pretty encouraging to me!!
GLTA
palm.
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September 5, 2012
To: Our Friends in the Investment Community
From: Wolfe Axelrod Weinberger Associates LLC.
Re: Discovery-Corp Enterprises Inc. (TSX.V: DCY, PINK SHEETS: DSCVF)
A Back of the Envelope Analysis of a Potential Sale of the Discovery-Corp
Enterprises Galaxy Property
KGHM, the Polish conglomerate that earlier indicated that it will be constructing a 60,000 ton
mill in the Kamloops near both New Gold’s New Afton mine and Discovery-Corp Enterprise’s
Galaxy project, recently announced that it had purchased the surface rights for part of the
Galaxy property, as well as the area where it already owns the mineral claims for its new mine,
for $21 million. This is encouraging news for Discovery-Corp Enterprises as it suggests that the
Polish group could be another interested suitor for Galaxy.
While at this early date we can not determine the value that the Polish group may attach to the
Galaxy property, we can intelligently try to estimate what the value of Galaxy might be to New
Gold Inc. (NYSE:NGD).
Randall Oliphant, Executive Chairman and Director of New Gold Inc. discussing New
Gold’s Q2 2012 results during its Conference Call on August 1, 2012 noted, “At today’s
commodity prices, New Afton has the potential to generate over $240 million of after tax
cash flow per year.”
Assuming that New Gold were to acquire the Galaxy Project from Discovery-Corp Enterprises
what could the Discovery-Corp shareholders expect to receive?
Currently, the New Afton mines planned capacity is 11,000 tons per day or 4 million tons per
year with a mine life of 12 years. Based on the statement of Randall Oliphant made, production
of 4 million tons per year at the current commodity prices would result in $240 million after tax
cash flow per year.Recognizing that Discovery-Corp Enterprises’ Galaxy property has historic estimates of- 3.2
million tons of ore similar to that of the New Afton mine (non-N.I. 43-101compliant), with
additional scheduled drilling to commence in September 2012 to expand the size of the
resource, one could estimate that it could add $192 million after tax cash flow to New Gold’s
bottom line for each additional year that the mine operates.
If additional drilling increases the size of the resource it follows that the contribution to New
Gold’s after tax cash flow could increase commensurately.
Possible Contribution
Galaxy Resource to New Gold’s After Tax Cash Flow 40% Discovery
(million tons) (million of dollars $) ($ millions)
3.2 $192 $ 77
4.0 $240 $ 96
4.5 $270 $108
Assuming that New Gold and Discovery-Corp split the incremental after tax cash flow on a very
conservative 60% to New Gold and 40% to Discovery-Corp and based on a maximum of 60
million Discovery-Corp shares outstanding, one could make a strong case for a minimum of
$1.30 per share value to Discovery-Corp’s shareholders with a possible $1.60 or more per
share.
Obviously, all of this is merely conjecture at this date since nothing has been said by either party
confirming that such a transaction can or will take place and there are many other factors
involved that are not accounted for in this back of the envelope calculation such as the size of
the resource, the future value of the gold and copper components of the ore body, the
economies of scale as the resource grows in size, the split between the parties, etc. but even on
the very conservative approach shown above, the return on investment to a Discovery-Corp
shareholder is huge.
Considering the current market price of Discovery-Corp shares around C$0.14-C$0.15 and the
significant after tax cash flow to New Gold, the benefits to both parties suggest that this scenario
is realistic and in the interest of both parties. KGHM might have something to say about value it
would put on Galaxy.
Disclaimer:
As reported in a February 1, 2012 press release, Wolfe Axelrod Weinberger Associates LLC.
(“WAW”) has been engaged by Discovery-Corp Enterprises Inc. for investor and media relations
services and, as compensation, will receive 450,000 incentive stock options that are exercisable
at $0.10 per share that expire five (5) years from the date of the grant. The options are vested
over a 12 month period with 37,500 being vested each month.
Consequently, there is an inherent conflict of interest in any information that is released by
WAW and we strongly recommend that any potential investor independently verify the
statements that are made and perform appropriate due diligence before making any investment
decision. This note is not a recommendation to purchase or sell shares of Discovery-Corp
Enterprises Inc. You are responsible for your individual investment decisions. All information
that is disclosed in this note has been reviewed by Discovery-Corp Enterprises Inc. and is
accurate as of the date that it has been sent out. Future events such as weather, economic
factors, inability to raise funds and other occurrences that are unknown at this time may create
the need to reappraise the Company’s prospects. Wolfe Axelrod Weinberger Associates and
Discovery-Corp Enterprises Inc. will not necessarily update the possible progress of Discovery-
Corp Enterprises Inc. and will not incur any liability for any action taken on the part of an
investor.