I'm always interested in hearing opposing views, and I hope those who are excited about the prospects of Loncor have the same interest. Seasoned investors eventually learn.
Please read below and comment on my valuation. From the contract with Barrick:
As per the joint venture agreements entered between Loncor and Barrick, Barrick manages and funds exploration on the said ground until the completion of a pre-feasibility study on any gold discovery meeting the investment criteria of Barrick. In a recent announcement Barrick highlighted six prospective drill targets and have commenced confirmation drilling in 2020. Subject to the DRC’s free carried interest requirements, Barrick would earn 65% of any discovery with Loncor holding the balance of 35%. Loncor will be required, from that point forward, to fund its pro-rata share in respect of the discovery in order to maintain its 35% interest or be diluted.
Now remember, Loncor does not own 100% of the Adumbi project. Only 85%.
According to this, Barrick already owns 65% of the Loncor portion. What is 65% of 85% of a 2.5million ounce deposit? 55% All they had to do as send some idle drills with a crew. Now, I don't know what the cost of a 7000m drill program in the heart of darkness would cost, but apapparently Loncor values it at 55% of whatever is in the ground that we know of. A lot less then 55% the $430 million Massawa project in senegal that certain posters here are comparing the project to. A 7000m drill program is worth more than $236 million dollars according to that logic. You could do a lot more exploration with that kind of cash. Notwithstanding that, there are string attached to Loncor. The company is required to fund 35% of the mine after the PEA or they will be diluted. What does that mean exactly? We lose interest if we can't come up with the money, or have to sell the reamining portion at a discount? Please explain.
Loncor only owns about 30% of the Adumbi deposit (35% of 85% interest) which is slightly more than half the grade of Massawa project. I'll say that Massawa should be valued even higher since it's not as remote. But lets forget that. Let's also forget that Adumbi is close to 2.5gpt while Massawa is 4. Let's say Loncor owned 30% of the much better Massawa project, to which posters here are comparing valuation. That is equal to about $130 million.
Since gold is trading at a higher price today than last year when the sale took place, we'll say that's fair. I don't know if gold will be drop or go higher iin real dollar terms. Gold bugs always say higher. To me, $130 million is the best case scenario, and would probably be sold at slight discount to Barrick to get out of the deal. Barrick has the money and therefore the power. This is approximately twice the current market cap of Loncor.
That's why I think a fair valuation in a best case scenario is about $1 per Loncor share. And yes, while we do have other assets they are fairly worthless in current discoveries and I'm factoring them into the final price. If gold drops in the several months, by the time the PEA is done, price is worth closer to current market cap and possibly lower.
Please comment with numbers, facts and figures. I think this is a fairly solid estimate. If we hit the high 80's I would probably sell.