Founders Metals Inc V.FDR

FDR target price?

[68Charger1]

I am going to offer a very simple model, and I invite criticism of my assumptions.

All figures in Canadian dollars.

Two other large deposits in Suriname are 13 million oz and 7 million oz, and I believe both were found under extensive long-standing artisanal workings similar to those on our property.

Our CEO looks to be a very sober, sensible character, and he is certainly not making any wild claims.  My own optimistic reading of FDR’s corporate presentation graphics tantalizingly hints its two active artisanal zones may actually sit above a single 8 km long zone.  But let us be at least a little more modest and assume the next 12 months of drilling outline a reasonable chance of only a 5 million oz deposit.
 
What other variables must we estimate?  To acquire 75% of the project, FDR will need approximately $15 million more than it has currently coming from option/warrant exercises.  (And those currently pending exercises assume initial results are strong enough to get the stock price above, say, $0.50.)
 
Financing at $0.75 to raise the extra $15 million would mean issuing another 20 million shares.  And that assumes drill results are strong enough such that no warrants need be attached.

Finally, what is a 5 million oz deposit worth?  If it is worth $200/oz in North America and $50/oz in Africa, is $75/oz reasonable for South America?

Put all this together and we see FDR 12 months from now being worth:

[ 5M oz deposit x $75 per oz x 75% of project ] / [ 56M shs F.D. + 20M new shs ]

= $3.70 Cdn per share

I am probably missing some minor factors, and quite possibly some major ones too, so don’t hesitate to correct my thinking.  It’s easy enough to argue I’m being too conservative, but I am more interested in ways in which I’m being too optimistic.

[68Charger1]

With the benefit of 4 months of hindsight, today might be a good time to re-assess my first stab at a valuation model for FDR.  In one of his subsequent interviews, I believe Colin Padget made reference to his goal being to find a 5-10 million ounce deposit, or something to that effect.  While we shouldn’t hang on his every word, especially as 5-10 million oz is essentially every gold

[Daugaard]

I think the average price in a buyout is 20% of the goldprice (at the time for the buyout) - but with large fluctuations in the various takeovers I heart it from Quinton Hennigh, Crescat.  10% in this case is okay i think :)