rsg - one of two most undervalued goldie

http://www.theaustralian.news.com.au/business/story/0,28124,25769415-18261,00.html

Golden opportunities

GOING in the other direction is Eromanga Uranium (ERO), which earlier in the year said it was realigning its exploration portfolio to place greater emphasis on gold. It then picked up a stake in the Nackara project near the old South Australian railway town of Peterborough, best known for its illustration of the absurdity of Australian railway planning in that, at one stage, its station yard had triple gauged track to accommodate broad, standard and narrow gauge trains.

Last month Eromanga bought the operating Georgetown alluvial gold mine with the potential, it said, to find another 45,000 ounces within the mining lease. And now it has the results of first exploration in South Australia -- a 450m-long gold anomaly with drill testing to follow.

Meanwhile, ABN Amro Morgans has done interesting technical analysis on valuing gold stocks. They worked out that the market capitalisation of North American majors Newmont Mining (NEM) and Barrick Gold are such that they would value unmined gold reserves at $270 an ounce.

Translating enterprise value per resource ounce (market capitalisation less net cash) the study shows that Andean Resources (AND) is the market leader with its Cerro Negro project in Argentina, due to the high grade, low production cost ($US100/oz), and cash of around $100 million. Next in ranking is Dominion Mining (DOM).

These two companies, surprisingly, have a higher enterprise value per ounce of what is in the ground than Newcrest Mining (NCM) but then Lihir Gold (LGL) manages only sixth place, behind Avoca Resources (AVO) and Kingsgate Consolidated (KCN).

The cheapest stock on this metric is Norton Gold Fields (NGF) due to its high operating costs, although the report notes it is moving to bring down the cash cost to about $750/oz over the next year.

ABN Amro said the two undervalued stocks which stick out are Intrepid Mines (IAU) and Resolute Mining (RSG), the latter with three producing mines. Intrepid's share price jumped 15 per cent on Friday after news that Vale is putting up $US40m ($51m) to buy a 60 per cent stake in the junior's Tujuh Bukit copper-gold mine in Indonesia.