I noticed that another company announced the purchase of a...

I noticed that another company announced the purchase of a zinc/lead/gold project this morning. PLD purchased a large 72Mt Zinc/Lead project in Western Australia.

http://www.asx.com.au/asxpdf/20141030/pdf/42tb0cwt2tdzks.pdf

Looking at their deal will enable us to make a few comparisons to the Balkans deal that we were all so appalled with.

Their deal to purchase a 72Mt lead/zinc project in W.A was.;

1. $30,000 Option Fee
2. $500,000 Cash
3. 1.5% Net Smelter Royalty (NSR) - (Can be bought back for $3.5M)
4. A one off $2.5M payment after 3 years of production.
5. PLD also has to spend a min. of $5M over 3 years on the project or it goes back to the vendor.

PLD can "buy back" the Net Smelter Royalty for $3.5 million (cash or shares). So that is the value that has been placed on that part of the deal for now.

So, in total a consideration of $6.53M (including the NSR valued at the buyback amount) for a 72Mt resource, and PLD has to spend $5M developing it further over 3 years.

The Balkans JORC tonnage is 9.51Mt at a similar grade zinc, lower grade lead but also included 0.37Mt of 89g/t silver.

So speaking very, very, roughly, the known JORC mineralisation contained in the Balkans assets was 13.2% the size of this deal for the zinc/lead assets recently purchased in Western Australia.

I'll let you do the math of discounting the PLD deals consideration to account for the Balkans MUCH smaller JORC resource size.

What we will actually receive for the Balkans in summary;

1. $50,000 Option Fee
2. $225,000 Cash Payment
3. 2% Net Smelter Returns (Up to the value of $10M)


Fox Davies utilised an "in-situ" resource valuation for Monty so in-ground values are valid for working this sort of thing out so IMO discounting the PLD deals consideration to account for the Balkans smaller size is an exercise worth doing. If nothing else, it gives us a rough comparison to look at. Obviously this sort of resource is also valued as a function of future income to be derived. Concentrate recoveries etc. are also relevant as each resource will have it's own characteristics and issues processing the polymetallic ore.

The upshot of all this is that IMO this sort of project isn't worth much, particularly with Monty only having a ten year mine life because of it's smallish size.

Looking at the value and structure of the PLD deal and the size of the Balkans JORC, IMO that $15M cash deal for the Balkans assets was always a pipe dream.....