one valuation method

Hey fellahs

Been doing a bit of analysis on MYG. Thought it could provoke some intelligent discussion. I'm happy with the numbers and while they are not all encompassing, they are merely INDICIATIVE. They don’t go anywhere near an NPV with assumptions from here to Africa about costs viability, global macro indicators etc etc etc. The best you can hope for in this game is to use logic. Here is some of mine.

I have been trying to find some valuation numbers relating to in situ values for gold ounces – the best I could find is the document found at the link below. While it was published in May 2010 – its still a very interesting read.

http://www.bdo.ca/library/publications/naturalresources/documents/T7-10-Gold-260110-sector-report.pdf

It details the following valuations for Measured and Indicated resources for:

Australian companies

Measured $738
Indicated $143

(Not used – too bullish)

And;

Weighted average value for Measured and Indicated resources of companies over London, Canada and Australia

Measured $340 USD
Indicated $53 USD

(all figures USD, also Inferred omitted because Measured & Indicated made up 91-93% of the in situ value – in effect further discounting the project value).

Obviously the market was in a different place at that time (and USD had a cross rate) but it’s a good starting point for determining roughly some value to place on Mutiny – I then usually discount that significantly to come up with an approximate in-situ valuation.

You can run the numbers yourselves but being conservative I have tended towards the Weighted Average figure and used that in all my calculations.

So when I looked at Table 6 – Deflector Deposit Mineral Resources (pg 5, 12 June 2012 announcement) and analysed the data I came up with the following numbers taking into account both Gold and Gold equivalent ounces


Measured and indicated deposit data

Au oz Au eq oz
Measured 191110 282589
Indicated 162538 192696
M+I total 353648 475285


Multiplying this out gives

$73.6m for the Gold + $106.3m for the Gold eq oz’s or a total of $180m

Because there is some concern about the value used in that MYG announcement to calculate the Gold eq ounces I did the same numbers again but this time discounted the Gold eq ozs by 40%. This is what I got:

$73.6m for the Gold + $64.3m for the Gold eq oz’s or a total of $137m

So in conclusion even when applying a very conservative approach taking this value of $137m USD and discounting even further (depending on your own appetite) I believe firmly that Mutiny Gold’s Deflector deposit has an in-stu value of 100m+.

Just some food for thought and I know I'm preaching to the converted here (but work was a hellava boring today and I needed an intellectual breather anyway!).

Once production occurs and we have some free cash flow to work with the valuations will get even more interesting.

Id be interested in others ‘rough’ valuation methods for companies at this stage of their life cycle.

Cheers and looking forward to saying goodbye to the sub 10c days!! ?