Before I get into how I have arrived at this subjective figure, there are few things I’d like to point out:
1. Lihir has just purchased Equigold for $560 per Reserve ounce, so we have a figure to work from. I don’t know anything about their modus operandi (open pit, underground, production costs etc), but hey, sounds good to me.
2. Large company’s are running out of ground. The general consensus is that they will be on the prowl to buy up more Reserves to simply stay in business. This means buying established Producers with know Reserves/Resources.
3. I keep harping on about CTO increasing their production … it has nothing to do with the number of ounces, it is all about proving that they can do it and that they can do it economically.
4. I also keep harping on about increasing Reserves … this is where the real dollars are when looking at buyouts.
5. I think we all need to start thinking about this fairly carefully. CTO has to be of interest as a potential take-over target and we should all have an understanding of fair value … so, what do you think?
SUBJECTIVE Pricing Rationale: 1. Shares and Options on issue – around 680m. 2. 300,000 oz JORC Reserves @ $550 oz = $165m 3. 9.7moz JORC Resources @$100 oz = $970m 4. 40m oz Blue Sky @ $25 oz = $1,000m 5. ($165m+$970m+$1000m)/168m = $3.14 per share
I reckon that’s conservative, what about you??
CTO Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
