The percentage used for the insitu value of a resource to determine the company market cap is a very loose goose number, it is usually based on the probability of the resource being developed,mined, proccessed and sold.
If the market feels and senses that development is high, the percentage of insitu value given to a market cap of the company will be calculated at a very high percentage and much higher than 5% as this was the case of SFR having a very high market cap in terms of insitu value.
If the market see's a very low probability of development the percentage of insitu value could be extremely low and well under 1% which is the case of many juniours with big value inground resources and small market caps which leads to many confused traders/investors. They simply cant fathom why the company is so cheap. The market is pricing in development senarios and will reward those with high odds and leave others for dust with little or no chance of development.
It dosnt matter what the inground value is because if it isnt coming out of the ground to be sold by the company holding the rights the real intrinsic value is ZERO baecause the value will never be relised by the company holding it.
SFR's resurce of around 11m tonnes or so is a rather small resource in tonnes but of high enough grade to deliver a robust return for the capital outlay for development, SFR is an example clearly how grade is king in most cases, you can have billions of tonnes of any metal but if the grade isnt high enough its staying in the ground. If the grade is high enough as is the case with SIR the tonnage can be on the small side as at the end of the day SFR's Doolgunna resource will be a robust cash cow for the years its operating paying back all development costs and high profit margins after the subtracting original development and running costs.
This is how and why the market will reward high percentages of insitu value versus very low in other cases.This is why SIR had a very very high market cap versus inground value which isnt available yet but the market is clearly betting from the drilling data that their high grade resource is coming out of the ground based on very robust grades, location etc etc etc.
As a few on this thread have said already the question at this stage is probably impossible to asnwer, the market is giving RDM about a $50m market based purely on speculation, all of us holding are hoping/betting on the companys new model panning out which is why RDM isnt $5m or $10m in value.
If the new model thought by RDM management plays out having the center of the target filled with high grade base metals the market will give RDM a significant rerate and this new value will be based purely on the probabilty of this mineralisation having continuity for further holes. I remember when Helix resources was valued at $500m on one drill hole in the Gawler Craton in the mid 90's which i think ended up being the prominent hill mine. Thats one example of a possibly extreme valuation on 1 hole but thats the market for you, they went from 30c to $5 in about 10 days or so...
Valuations are very tricky to work out as these numbers can swing wildy from hot money/traders entering the picture pushing valuations higher than what probably should be the case. Every man an his dog think they are an expert on what the company should be worth, this is what we see every day on hotcopper with all sorts claiming they have the answer.
Having been in the market for more than 2 decades ive had many ups and downs, seen many rogue junior explorers with absolute dodgy managemnt, ive run my ruler over RDM with great detail and the one glaring fact that stands out in favour for the board of RDM is this. The company has been operational for 9 years now and just recently went to 142m shares on issue with the recent placement. This is oneof the best track records any junior has produced in terms of dilution considering they are yet to make a major discovery. I will bet that if you got every other junior that listed 9 years ago that many would have already been delisted, if they are still listed they would have close to a billion shares on issue and trading sub 5c. The companies that listed 9 years and still have tight registers mostly made discoveries which let them raise capital at much higher prices. RDM not having been lucky enough yet and having less than 150m shares on issue truly is a remarkable achievement by the board. On top of this one of them recently throwing $400k in to buy shares onmarket at much higher prices(between 23c - 28.5c)The director bought his extr shares about a week after the placement at 18c and then again another 1m shares less than 2 weeks after the placement, this director could have easily gulped down all the shares he wanted at 18c but was happy to market rates which were up to 50% higher less than 2 weeks later.
The integrity of the RDM board is seocnd to none combined with the upside from current drilling has me well inside the top 20(still accumulating) fully understanding the downside we all face with exploration.
I take my hat off to the board win, loose or draw.
RDM Price at posting:
34.0¢ Sentiment: None Disclosure: Held
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