short term target ~150c

Took a punt at what imo PMI could trade at in the short term based valuations of other african peers, particulary AMX as their feasibility study objectives appear to be very similar.


Summary;

4.5 Moz valued EV/oz of A$51/oz.
Grade is comparable or better than peers.
Peer valuations (Africa) typically trade between A$100-$200oz.
18,700m are not included in the resource estimate, likely further increases beyond 4.5Moz are possible.
Figures below include no value for Kubi which could be a very significant high grade (~5 g/t) deposit plus additional targets in the same area.
Any consolidation between Anglo/NEM/PRU/PMI and others in Ghana would increase interest in PMI.
Current cash levels is adequate for the rest of 2011.

AMX current EV of $336M with 1.9 Moz @ 2.0 g/t.
PMI current EV of $227M with 4.5 Moz @ 2.4 g/t.

For PMI to just reach the same market cap as AMX then sp would need to rise to ~147c.

For PMI to reach the same EV/oz as AMX then sp needs to rise to ~323c.

Therefor see short term FA target of 150c as a minimum as i cant see why PMI should trade at a discount to AMX.

PMI does have 13M 30c options (TSX listed) which will be exercised in the next few days that may put pressure on the sp if not already despite rise on Friday. Once the dust settles and the updated resources sinks imo expect to reach ~150c as a minimum target and then into 150-320c range to better align with peers.


AMX
172c
204 shares
13 options
$373M FD market cap
$24M cash (est after qtr spend)
$13 options
$37M total cash

1.9Moz Resources
2 g/t

$336M EV

EV/oz
A$177.


PMI
104c
200M shares
60M options and warrants

A$270M FD market cap
$18M cash (est after qtr)
$25M cash (est options ex)
$43M total cash

EV A$227
EV/Oz A$51M.



Forward Looking Value options

Potential PMI Valuation from AMX

AMX direct EV
$1.47

AMX EV/oz
$3.23


Notes;

EV/Oz for peers, slide 21, typically plus A$100/oz for advanced projects and mostly lower grade than PMI.

http://www.pmigoldcorp.com/i/pdf/pmippt-September2011.pdf


"The significant size and strong grade of the updated resource validates PMI's decision to
undertake its Pre-feasibility Study mine plan utilising a 3Mtpa plant, and demonstrates the
potential for the resource to underpin a substantial and long-life gold operation at Obotan."

AMX plant size is also 3Mtpa on similar timelines for its PFS and production. AMX resource upgrades are also likely.

http://www.pmigoldcorp.com/s/News.asp?ReportID=485190&_Type=News-Releases&_Title=Obotan-Gold-Resource-More-than-Triples-to-3.22Moz-Measured-Indicated-and-1....


Report values Obotan at 66c before resource upgrade, expect updated report to detail valuation at 200c levels.

Kubi valuation appears too low.

http://www.pmigoldcorp.com/i/pdf/PeterStrachan-report.pdf


From Argonaut Securites Valuation of Azumah Resources;

"A total valuation of $252m or $0.90 per share is estimated, assuming $100/oz for unmined
resources and a nominal $50m for exploration upside."

Similar valuations would yield ~225c for PMI.

http://www.azumahresources.com.au/documents/rr110914-argonaut.pdf


Friday's upgade may change the scope of the current studies to support increased production rates and bring the UG operation forward.

Peers AMX and AZM sp peaked late last year, so using the current AMX valuation is not historically at high levels.

Any corporate action for PRU by majors will likely elevate PMI's valuations further.

To any AMX holders out there, im not bagging AMX here at all, just using it as a valuation as projects, PFS targets and timelines look similar for this purpose.

EV/Oz notes

EV/Oz is one method for valuation, direct comparisons are difficult using EV/oz alone as market caps can be factoring other values such as corporate appeal, high chance of exploration success, political risk, timelines ect. Capex/opex between projects also differs.


Key risks;

Gold price, exploration success, continual funding into 2012, local tax changes.