RE:RE:RE:RE:Interesting intraday trading. auburn2,
To answer your question, I calculate valuation of gold stocks in terms of price times share float divided by quarterly gold sales or production. That yields MC/oz of gold equivalent. I use the rank of each stock to track the changes in the fundamental strength of each stock.
Orvana (ORVMF) ranks #2 and trades at $645 USD per ounce of gold equivalent (fiscal Q3 31,325 oz). Mandalay Resources (MNDJF) ranks #10 and trades at $2824 USD per ounce of gold equivalent production (Q2 22052oz). Alio Gold (ALO) ranks #17 and trades at $3371 USD per ounce of gold equivalent (Q1 = 17,624 oz).
So I agree with you that Alio Gold is strikingly cheap, and it is on my watch list. Mandalay Resources, on the other hand, is in the dividend stock portion of my portfolio, as it has historically paid 6 percent of previous quarter's cash flow in dividends, and i expect the dividends to resume once Cerro Bayo comes back on line.
On Orvana having high cost ounces, that is largely a function of their conservative accounting practices. Every dollar of capex gets expensed. in the current quarter, so while the cash cost last quarter was $1055 USD per ounce, compared with $889 USD at Alio Gold, the
AISC/ounce at Orvana was $1309 USD while at Alio Gold it was $1262 USD. Orvana finished its tailings dam raise at Don Mario in Bolivia.
Both Alio mines are heap leach operations with a gold grade of 0.53 g/t at San Francisco in Mexico, and 0.44 g/t at Florida Canyon in Nevada, and so for Alio to grow gold production, they have to increase the number of ounces placed on the leach pad, and gold recoveries are going to be 60 to 75 percent depending on environmental conditions.
Contrast that with Orvana where you have record gold production levels from a high grade underground mine at El Valle in Spain with oxide ore grading 5-8 g/t being blended in with copper skarn ore grading 3 g/t gold and 0.5 percent copper.
The MRP at El Valle produces gold dore and copper concentrate and had a gold head grade of 3.36 g/t. Gold and copper recovery were 91.8 percent and 81.6 percent respectively.
At Don Mario, they also produce gold dore and the average head grade was 1.9 g/t last quarter, and they are mining an open pit deposit with an average grade of 3 g/t.
For Orvana to increase gold production, all they need to do is to increase the fraction of oxide ore from 39 percent to 50 percent, and that adds 1 g/t to the head grade. That is something
that a low grade heap leach producer cannot do.
At Mandalay Resources, Bjorkdal in Sweden produced 12,428 ounces of gold and 6069 ounces at Costerfield for a total of 18,497 ounces of gold compared with 26,761 ounces at Orvana. Costerfield had 3,555 ounces of gold equivalent production in antimony by product, with El Valle had 4564 gold equivalent ounces in copper. Last year Q2 2017 gold equivalent production at Mandalay Resources was 35,709 ounces, so the stock is trading at a discount to its production potential due to Cerro Bayo being on care and maintenance, and lower grades at Costerfield.
Orvana has been increasing in relative value versus both ALO and MNDJF, but the following chart shows that Mandalay Resources is in an uptrend versus Alio Gold. Whether the addition of Rye Patch changes that will be seen once the Q2 financials come out.
