RE:Two new drill padsbovalena wrote: So, if the drilling finds and confirms a higher grade pit to the northeast of 10 million ounces over 1 gram per ton, then at $1700 gold with AISC of $1200 per ounce means $500 dollars per ounce of profit producing one million ounces per year for ten years would be 500 million per year of profit or 5 billion over ten years our twenty percent is $1 billion. ???? Watcha think Zorg???
Hi Wallace. For the maiden estimate data I worked up a mine scenario only including the 12.7 million oz. Au in the open pit that were already M&I. I guessed that 5.4 million oz. would be extractable at over 1 gram per ton, and I agree with your price of $1700 and AISC of $1200 for a profit of $500 per ounce.
So 540,000 oz. per year over ten years would be a profit of $270,000,000 per year. 20% to Teuton would be $54,000,000 or abouit .90 per share. I assume Teuton would have to issue more shares to fund its portion of the development and operating cost, but that sunk cost would reduce the AISC cost per share to maintain the $.90/share per year profit. As a result, for that ten year period Teuton would have the .90 per share profit per year and the stock price would have some P/E multiple associated with it. I also assume there would be an annual dividend while the mine was in production and I assume additional reserves would be identified at >1 g/t to extend the life of the mine by at least 5 more years.
If we assume a very reasonable P/E of 15, that would be a share price of up to $13.50 at some point during the early years of operation.
This ultra-long-term type of analysis is highly speculative of course and there are a large number of alternative scenarios that could play out. A sale of Teuton's stake in Treaty Creek is the more likely outcome, with Teuton keeping the .98% NSR during the operation of the mine.
The annual value of the NSR in terms of Teuton stock would be about .14/share - plus the money Teuton would get for its 20% stake in Treaty. My number on that is currently about $221 million or about $3.68/share as a one-time gain to Teuton. This values Treaty Creek as a whole at about $1.1 Billion which could turn out to be a very conservative valuation if the mine is developed prior to the sale or the price of gold in the ground is higher than $65/oz or the number of M&I ounces in the open pit model grows to over 17 million which are my current assumptions.
We'll know an awful lot more after the updated estimates come out and the junior mining sector needs to come out of the doldrums a bit I think before any kind of mine development is workable, although sales of gold in the ground are going pretty well. That said, the stock prices generally appreciate when the direction becomes clear and most shareholders don't have to actually wait for the mine to be developed or the sale to occur if the market anticipates that these things are going to happen.
Do your own DD. GLTA Doug