re: what is going on? gryphon1 Gryph,
ABN said that if you assumed a ZERO discount rate, a spot price of US$444 per oz and FX AUD/USD of 0.78 then you could possibly justify A$0.43 per share.
But, when would a ZERO discount rate be applicable here?
They go on to say, the key risks to our target price of $0.22c per share is:-
1. the reserve size and grade
2. development costs
3. operating costs
4. movement in the gold price.
They also say "without further drilling and underground development, Ballarat has only stated resources...
Indicated resource 278910t @ 9.16 g/t for 82K oz
Inferred resources 1671514t @10.96 g/t for 589077 oz
TOTAL RESOURCE 1,950,424t @10.70 for 671,276 oz
So, whilst the potential is great...the variability in grades is huge as well (1.5 g/t to 80 g/t) thus, it is essential to managing the risk in the Target Price that further resources and reserves are PROVEN (investors don't rely on some computer modelling of what may or may not be proven).
Admittedly, they also say upside risk remains with further exploration drilling to increasde the resource and extend the mine life.
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