Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $99). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
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https://stockhouse.com/opinion/ticker-trax/insights/2013/06/28/kmart-special-%E2%80%93-five-million-gold-ounces-$2-per-ou
June 28th I featured Volta Resources Inc. (TSX: T.VTR, Stock Forum) (33 cents) at 14 cents and four months later a takeover was launched by B2Gold Corp. (TSX: T.BTO, Stock Forum) closer to 40 cents. Volta is a gold exploration company in West Africa with an estimated 6 million gold ounces grading 1 g/t that B2 was paying about $11 per ounce for.
Late June investors wrote off junior gold stocks and they hit incredibly low valuations before bouncing back (moderately) late July. I am seeing these lows all over again as tax loss selling kicks in - and will remain for another couple weeks.
My gold table currently shows an average of $15 per gold ounce. A VERY high level of pessimism and possibly the time to be picking away at some of the better companies.
PMI Gold Corp. (TSX: T.PMV, Stock Forum) is in West Africa (like Volta) but with much higher gold grades and a giant bank account. Their gold valuation is down to approx. $5.70 per ounce. A close regional neighbor to PMI is Asanko Gold Inc. (TSX: T.AKG, Stock Forum) ($2.15) with an equally depressed valuation but they recently raised $150 million for mine development. This complements the $190 million they have in their bank account.
Other neighbors of PMI include world class mining companies. They may have no interest in PMI but the acquisition of Volta by B2Gold also caught everyone by surprise.
PMI GOLD (PMV.T 28 cents)
www.pmigoldcorp.com
Shares Outstanding: 414 million
Cash $100 million – Debt $6 million = $94 million net cash = 23 cents per share
Capitalized Exploration & Drilling Costs: $107 million
Land Position: 580 sq.km in a world class gold district
3.1 million gold ounces measured and indicated, and another 1.4 million inferred. The average grade is very good at 2.1 g/t
The only unfortunate thing about this company is the amount of stock outstanding. It is largely held by institutional investors but at some point it caps the valuation. Right now with the giant bank account and depressed valuation it is not a major issue. Down the road it limits upside potential.
At 28 cents the market values this company at $115 million. If we pull out the net cash of $94 million it means the underlying gold ounces are being valued at $21 million (115 – 94).
If we give them full credit for 3.1 million ounces but only 40% of the 1.4 million inferred (because it takes more money to prove up those ounces), we can say their “risked” reserves are 3.7 million ounces.
If we now take the $21 million noted above and divide by the 3.7 million risked ounces, we can see the stock market value on those gold ounces is $5.70 per ounce. Very low given the grade, size of the deposit, and the strong balance sheet.
To see a larger version of this chart, pleae click on the link:
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The stock has good liquidity near 28 cents and this should improve during the next two weeks of tax loss selling. If you are willing to speculate on gold stocks right now (and go against herd mentality), then this is an attractive range.
To view a larger version of this chart, please click on the list:
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Disclosure: Danny Deadlock owns 50,000 shares of PMV
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