Have been thinking about comments here re BLK over priced, other HC members suggesting on DFS alone MC of $75m some have said that because of our debt the current EV is high compared? All worthy comments and a balance is great, some even after CR and Canacord stumping up $20m for a $111m MC valuation on BLK are hoping for sh price to drop to 30 cents?
So of course one questions himself, are my expectations to high? So i have been looking at our MC at 55.5 cents is $137m and trying to justify were i see current value with value to be added in short to medium term? Not just how i see value but how Canacord might see value to stump up the $20m?
Well my conclusion is i think under current POG our market cap is nearly solely justified through our resource alone, standing at a whopping 4.7m /oz and @ a respectable 3.3g/t, now since DFS with 500k/oz in "reserves" and 7 -10 year LOM!
EV for resource at this level of confidence and in current POG environment should at least be $25-30 a ounce, this is arguably conservative also as the industry average is $66? And to be fair i think this target of $40 will be achieved with further development from Bulletin, EW and our 7 high grade quartz vein deposits?
So i think as they expand this by way of LOM, Reserves or Head Grade, our market value should increase alone on resource also accordingly?
And as a result our valuation on resource alone using $25-30p/oz should be $120-150m maybe more? If you use on a $40 p oz basis is $190m which is still $26 lower than industry average?
Remembering this is before the operation of processing and producing the actual gold i.e.; making money, "the business model", which as a we are targeting becoming a 100k/oz producer around this transitional period leading up to and actually producing would be fair to add another $50-100m to our MC by this time frame say Jul,Aug,Sept-Jan, so $200-250m
If they are looking to produce over the 100k/oz p.a (indication from quarterlies) more like $150m added to MC, so $300m MC?
There also has to be some emphasis on their transition to sulphide in the near term, as if all goes well transitioning to Sulphides in terms of grades and resource, moving to a 130-200k/oz producer in 2018/19, best case scenario re ounces per annum would be conservative $400-500m MC should be justified!
Some comparisons in resource valuation just looking at other companies and breaking down their market caps;
GOR 6.1m ounces @ $60 per ounce = $366m
DCN 3m ounces @$66 per ounce = $198m
DRM 1.2m ounces @$60 per ounce = $72m
RMS 2.2m ounces @ $25 per ounce = $55m
Companies in this example like DCN & GOR are not even producing yet maybe by end of 2018, so their MC a purely on resource valuation also, now as the business model of actually producing is a way off/years of being put into production, once taken this transition will add to their market caps again, as they cant possibly be fully priced now surely?
So based on this research i believe BLK is not price to high, and has significant growth leverage potential in the very short term of $200-300m MC and long term 2018 potentially $400-500m MC?
Very interested to see were this company will be in 3-5 years time when you look at the growth stories of NST over last 6 years and DRM over last 3.5 years, with BLK huge resource, and variety of deposits still currently under explored respectively, if executed well by management could be similar, the potential is there that is forsure?
