With IVZ now sitting below $10 mil market cap, I keep looking at the price of IVZ and thinking to myself is the company undervalued or not?
So I have gone away and compiled some data on a company listed on the TSX which is hoping to drill within the next 12 months (like IVZ).
That company being
https://reconafrica.com/TSXV: RECO, which is at the early stages of exploration (much earlier than IVZ).
I have sort to breakdown as many points as possible below and explain the differences where applicable.
So lets have a look;
View attachment 2003080A lot of people are who don’t understand the difference between Conventional and unconventional plays are probably seeing the target above and thinking the valuation differential is fair, well it's not;
View attachment 2003119So if we look at the two companies, the conventional and unconventional and put them side by side, we can see the below in regards to target density;
View attachment 2003143Why is this important???
Well it's important to look at in terms of economics and cost of recovery.
If you assume well spacing of 600m apart you can see the amount of wells needed for IVZ is less than 5% of that of Recon, when drilling to depth it's important to understand the cost associated with recovery of a resource.
I would hazard a guess that IVZ may have calculated shale resources as well from it's seismic data but have preferred to not release the data as it wouldn't make economic sense (flow rates too low I'd assume and the amount of wells needed)
Recon at $54mil market cap next vs IVZ at $9.5mil market capIt's hard to believe when looking at the potential economics of each project that valuations are the way they are. I myself would think they would be reversed. Obviously there is somewhat of a discount for Zimbabwe, but 80% is laughable.
I think IVZ are very close to some major milestones that will be somewhat of a catalyst for price action for the company;
- Product Sharing Agreement (we are 36 days into the 100 day plan from the government)
- EIA (lodged with government)
- Fiscal regime changes (drafted with government)
- Petroleum act of Zimbabwe to be finalised (with parliament)
-Farm out to be completed (in progress)
When you look at the upcoming milestones and the quality of the target it's hard to believe the company is valued so cheaply.
When you compare it to the likes of Recon who face a near impossible task, it's just a matter of time until the market wakes up and gives IVZ the valuation it rightly deserves, multiples from it's current position imo.
