CZRs share price seems to be valuing the Croydon deposit at $nil.
Given the similarity of location and geology of Croydon to hemi, one would expect at least some value to be applied to Croydon. After all, De Grey only has the Hemi deposit which is about 10 times the size of Croydon in key areas of geological similarity.
Croydon has had some good drill results to date. I would reasonably expect the concentration of gold to make the deposit economic to exploit. But that could be a pipe dream. Odds of the deposit being economic increases substantially with hemi right next door, which increases synergies and reduces infrastructure needed for processing of Croydon gold to nil, as resource can be trucked to Hemis plant. Although the trucking would add cost, it would overall reduce cost.
The relationship between Croydon and De Grey feels very much like the relationship between Robe Mesa and Rio Tinto.
De Greys hemi deposit contains 13.6 million ounces of gold and the market values the company at over $5 Billion dollars as of today. This is their one and only project. If anomalies are similar, I would conservatively expect Croydon's resource to be 5% of what is contained at Hemi, which would place it at 680K oz.
If we also take this 5% and value Croydon based on De Greys market cap in relation to Hemi being their only asset, we will come up with a market value of Croydon at $250M at today's gold price. Based on the conservative estimate I do not think it is unreasonable for Croydon to be worth $70 to $100 million to De Grey mining. Again, none of this value is reflected in CZRs share price. Does the market really think Croydon is worthless?
An uncovered resource base is worth much more than one hidden, so how much will it cost to fully uncover Croydon's resource base? $30 or $40 million? Croydon's resource base may be uncovered in the years to come, when gold price is much lower than it is today, so the value attributed to the deposit may be lower. But the gold price may also go higher?
The above is merely speculation based on a brainstorming with available information. Would be interesting to hear the input of others who have additional information and ideas on the Croydon project.
CZR Price at posting:
30.5¢ Sentiment: Hold Disclosure: Held
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