value of the 2 percent royalty

I personally believe that the next report will be the valuation of the 2 percent royalty on the Johnson Range Iron Ore sales.

I believe there is a time frame built in the Sales Agreement given the news release mentions the $3 million dollar received is a non-refundable prepayment of royalty. Yet, the time frame has not been reported to the market. I personally believe this time frame once reported will be the ammo of this campaign, it will send the sp further north before the release of the RPS report.

The time frame could be shorter than we expected. It could be in the period of between two and three years. When I look at Johnson Range on Google Maps, I couldnt believe how close it is to Cliffs Windarling operation. It is only about 40km north of their Windarling operation near Mount Jackson. Also, a letter to Cliffs shareholders released on 26 May 2010 indicates that Cliffs Natural Resources Board of Directors approved a capital proposal to proceed with the expansion of annual capacity at the Companys primary production complex near Koolyanobbing from 8.5mt pa to 11mt pa. Given Cliffs only have three operations in the Yilgarn region and the Sales Agreement signed on 30 April 2010 I would expect the expansion is for the Johnson Range project. All these tell me that the 2 percent royalty is close to home. For those who has not read the Letter, here is the link

http://www.b2i.us/profiles/investor/ResLibraryView.asp?ResLibraryID=38340&GoTopage=2&Category=1810&BzID=1041

So, what will the value of this 2 percent royalty be? Lets assume the sale price of iron ore at Johnson Range was $100/t. The expansion is 2.5mt pa. 2.5mt at $100/t at 2 percent gives GDN a net profit of $5m pa. When we apply a PE ratio of 7 gives GDN a market cap of $35 million dollars and when we apply a PE ratio of 10 gives GDN a market cap of $50 million dollars just on the royalty alone, not to mention the value of Golden Eagle Gas Field.

In my opinion, GDN is way undervalued based on the above calculation. DYOR.