in situ valuations

Hey all.

For what it's worth, thought I'd share this.

As most of you would know, one way of valuing gold companies is to calculate the enterprise value divided by ounces in resource / reserve. I'm finding this interesting as something to factor in when looking at what might be currently undervalued goldies. Of course the usual other factors - cash position, management, etc etc etc play in, but in terms of basic viability and buy/sell signals it's not a bad metric to throw in the mix.

Found this nice bit of research by Alto capital that breaks a lot of companies in the sector down. It's posted at the Kingsgate site at:

http://www.kingsgate.com.au/sx_releases/Broker%20Reports/2008/Alto%20Capital%2011-08-08.swf

Turn to P 18 and voila! A lovely little table of producing and emerging gold companies on the ASX. Note that EV/Reserve figures are conveniently given, and I personally ignore resource calcs in this environment (as a very broad statement). Note, for example, that LGL offers better value than NCM on this metric alone (although I'd personally also factor in sovereign risk in this example).

For what it's worth, the late Julian Baring valued metal shares (including PM shares) thusly:

"Buy up to 10% of the in situ value of a deposit using current metal prices, hold up to 40% and sell above 40% taking no prisoners"

Just a little Sunday evening thought.

Happy trading!