Northern FreeGold Resources 21 February 2013
NFR - V (Toronto Venture Exchange) Price: 10 cents
Target Price $1.21 Shares Outstanding: 144,300,000 (fully diluted)
Market Capitalization: $14.4 million (fully diluted)
Northern FreeGold Resources plans to develop 1.3 million indicated and 1.9 inferred gold
ounces at two adjacent deposits in the Yukon. It is expected that these 3.2 million ounces will
expand as further exploration/development work continues.
A just announced Preliminary Economic Assessment projects a robust $615 million NPV and a
23% IRR for the two deposits. Metal prices used are three year trailing prices which in future
years could be considerably higher.
Annual production is forecasted for 150,000 oz. of gold, 17.3 million lbs. of copper, 4.2 million
lbs. of molybdenum and 355,000 oz. of silver. 200,000 oz. of gold will be produced the first 5
years.
The Life of Mine cost per ounce of gold (net of byproducts) is $399 a very favorable cost per
ounce compared to an average industry cash cost of approximately $700 per ounce projected
for 2015.
Mine life will be for 11 years at a very favorable strip ratio of 2 to 1.
Infrastructure characteristics are very favorable and the properties are road accessible.
Compared to some other Yukon mining companies that have been well financed, NFR has
much better fundamental positives and this suggests a much higher share price rating in the
future.
Pre-production capital of $500 million will be needed; this suggests a merger or buy out of the
company at a reasonable valuation by a mid-tier mining company where a 150,000 ounces of
production with a higher profile in what could be a district wide mining camp would be very
appealing.
Our analysis would be as follows based on 1.65 million ounces of future production:
o Mining cost per ounce: $400
o Capital per ounce: $303
o Buy out price per ounce : $125
o Total: $828
Therefore using the above guidelines and considering probable further dilution with the
issuance of 25,000,000 million shares we arrive at a buy-out valuation of $206 million or $1.21
per fully diluted future share.
The above assigns zero value to the company’s other properties, grade or tonnage upgrades
at the existing properties or new regional discoveries.
NFR is very undervalued and in my opinion could command a much higher share value even in a lackluster precious and base metal environment.
Kenneth J. Gerbino & Company and the Gerbino Gold Group LLC own shares of Northern FreeGold Resources.This report is not a recommendation to buy or sell this security and is for informational purposes only. Information is believed to be reliable but there are no guarantees of the accuracy of this information and the forward looking statements expressed in this report should not be viewed as anything but forward looking statements. Kenneth J. Gerbino & Company seeks safe harbor from any data or statements expressed. All information is speculative in nature and this security is for speculative and
aggressive accounts only.