Either Entree is going upor Ivanhoe is coming down. The valuation gap between the 2 is too large considering recent events. Aaron 42 and I crunched some numbers the other night and using a conservative yet crude model, we came up with 110 million tons if the orebody extends 500 meters onto CF.
Using current copper prices of US$1.45/lb (CDN $1.83/lb)and using the 3.31% Copper equivalent over the entire intersection as per Entree's May 27th NR, we can put a rough gross value on the orebody as follows;
3.31% copper = 66.2 pounds copper/ton
(110 million tons)*(66.2 lbs/ton)*(CDN 1.83/lb) = $13.3 billion CDN
We have 20% of what is in the ground under 560 meters, so our in situ gross value then works out to 2.66 billion. The big question is what kind of value present value do we place on 2.66 billion metal in the ground. If we use the 10% rule, then our current deposit valuation would be $266 million, or roughly $5.22/share using 50.2 million shares os. Obviously at these evaluations, you can probably use 60 million shares OS as all options and warrants will be converted.
However, IVN's current cap suggests a deposit valuation of much lower than 10%. IMHO, 90% of IVN's cap is attributable to Oya, whereas the other 10% would be attributable to Monya Copper, Coal, other land holdings, etc.. Ivn's current cap is 300 million shares OS times 8.60 which works out to approx 2.6 billion canadian. using the 90% attributable to Oya, this puts a market valuation of about 2.3 billion on Oya. Considering that the last update from IVN, using both indicated and inferred resources (Porphry style deposits are very consistent) works out to 65 billion lbs copper, and 25 million oz gold, which is worth about $130 billion cdn. This would imply that IVN's current evaluation is about 1.8% of in situ metal which is ridiculously cheap. It's no wonder that RF is so frustrated!!
If we receive the paltry IVN evaluation of 1.8%, then our value attributable to Copper flats only is about $47 million, or about $1.00/share. IMHO, we should have a higher deposit evalution since it appears that all our ore is super high grade, not marginal as in the case of the non-hugo ore within Oya. Additionally, the big plus for us is that we don't have to pay for our share of development costs until we are receiving cash flow from the project - a huge plus. That is why IVN's valuation is so low - the market wants to know how they plan on paying for the huge costs of mine development. That's is precisely RF's dilemna - he can't get a higher deposit evaluation, and he can't dilute or sell off a portion of the deposit at this ridiculous 1.8% evaluation. Hopefully, The SA is soon forthcoming, and that will help both IVN and ETG immeasureably.
The good news for us ETG longs is that any upside for IVN is also in the cards for us. Also, this above scenario is only for the first 500 meters, and that only assumes that the orebody is 500 meters wide and 300 max depth. Surely this puppy can keep on continueing northward.
On a final note, I am a little confused about the hypothesizing wrt the warrants that are still outstanding. Perhaps Smartchick can enlighten me? Take for example the 6 million warrants with an excercise price of 1.35 that expire in Oct '05. These warrants do not trade, and are held by the CC clients that participated in the OCT '03 $12 million financing. It is assumed that most of these warrants are held by institutions since most of the financing was institutional, and it was fully spoken for before the deal was announced - I know since I have a good friend at CC who was unable to get me any of the units. Like most have done, I would have kept the warrants, and blown out the paper once the stock traded over $1.00, which was the price of the financing. This explains why CC has been on the sell for so long as the clients kept their warrants and sold their stock.
Anyhow, currently the warrants, which do not trade on the market, have an intrinsic value of $0.12, with about 5 months left until expiry. If GC were to find a buyer, I am certain that there would be a decent time premium associated with the warrants given the recent success of the CF drill program. But there would be no "CROSS", as the selling of any warrants would be an off the market transaction. How could there be a "cross" associated with some entity buying some of these warrants? I certainly have no doubts that the warrant holders have been approached, but if they settle on a price and sell, we won't see anything on the market. Am I missing something here?
On a final note - HeeeeeeeHaaaaaaaaaaaw! Congrats to all longs who have waited so long and patiently for this to come to fruition. Yea, there were plenty of ups and downs, and yea, there will still be tons of games left to be played with RF in the picture. But even these dismal markets of late can't stop the oncoming tide, and we are still at a low tide, it's just that we've just past the low slack!! We won't see high tide until we've been snuffed!! Let the games begin, and once last thing fellow longs. Hold on tight to your paper,and even grab a little more if the cash permits...
Jandd
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