Stockhouse Ticker Trax is equity specific research (Canadian listed and market cap < $300 million) published every Monday to paid subscribers. Our free Friday column may feature companies previously featured to paid subscribers (with a minimum one month delay) or discuss topics of interest to the general investment community and relevant to overall portfolio management.
This week’s discussion topic
I. Update to our junior gold stock valuation table: Valuations on a per ounce basis remain low but are moving in-sync with the underlying commodity.
Junior gold valuations have increased 7.2% this past month. Gold has gained 7.8%
We were surprised to see our basket of junior gold exploration stocks moving so closely in-sync with the price of gold. Many factors affect these small companies and it’s unusual to see them move with the commodity in the same fashion as their blue chip counterparts.
The TSX Venture Composite Index, which represents the best of the TSX.V, gained 15% since we started this gold study for Stockhouse in December. During that same period of time, the per ounce valuations for the junior gold stocks in our study have gained 22% - rising from $48 per ounce to $59 in February.
A few companies were added or removed from the list in January and February to help ensure it was an accurate representation of the sector. For example, in February we removed Grayd as it was a high-priced acquisition from last year that was losing relevance. We also decided to remove two excellent companies (ORV and SGC) because they owned huge copper resources and in relation to their gold ounces, it was artificially elevating the price per gold ounce. Seafield (V.SFF) was added as a new company in February and you will see why in the next paragraph.
You will notice in the tables that a large percentage of the companies still trade well below the average and there could be tremendous potential in several of these. Values per ounce range from $8 for 2.4 million ounces (Seafield in Colombia) to $204 for 1.6 million ounces (Wesdome in Canada). Sixteen companies still trade below $30 per ounce.
Standardized monthly notes for our gold tables:
We have sorted the same table four ways so you can determine which format is the most useful.
Note: Due to limited space for website presentation, we are not able to display various additional notes for many of the companies. This may include additional copper or silver resources that were not taken into consideration for the valuation. Only resources that were specifically reported in a 43-101 report were included. Many of these companies own various other projects or assets that may add additional value. Almost all companies host a Powerpoint presentation on their website and this is a valuable tool for doing further due diligence.
(Please click on the individual table to see bigger size)
Comparative Chart of Junior Gold Companies - Sorted by EV/Risked Reserves
Comparative Chart of Junior Gold Companies - Sorted by Net Debt (Cash)
Comparative Chart of Junior Gold Companies - Sorted by Total Reserves
Comparative Chart of Junior Gold Companies - Sorted by Name
Important note: Our Ticker Trax Comparative Gold Analysis is an educational tool. If you are not a professional money manager we strongly suggest working with a qualified investment advisor prior to making any investment decisions based upon these tables. Once a month we will update this analysis and publish it on Friday afternoon with any relevant notes.
Research & Analysis by Adam Deadlock [*]
[*] Adam Deadlock is a 2012 graduating finance student from the University of Calgary, Haskayne School of Business. Adam does part time research and analysis for various Ticker Trax projects and also for MicroCap.com. He is part of a small group of Haskayne students involved in the Calgary Portfolio Management Trust (CPMT) initiative.
Gold table reference notes:
Measured Mineral Resource: is that part of a resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of a deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Indicated Mineral Resource: is very similar to the Measured classification but the resource can be estimated with a level of confidence “sufficient” to evaluate economic viability of the deposit. This classification is much stronger than Inferred but still makes a significant number of assumptions. Most junior exploration companies in Canada report Measured & Indicated (M&I) in the same category.
Inferred Mineral Resource: is that part of a resource for which quantity and grade or quality can only be estimated on the basis of geological evidence that involves limited sampling and reasonable assumptions. The estimate is based on limited information gathered from locations such as outcrops, trenches, pits, workings and a very limited number of drill holes. The inferred category is similar to saying “we have a reasonable expectation the minerals are there but have yet to prove it through sufficient drilling.” Moving a resource from Inferred to M&I can be time consuming and expensive.
Original Gold Valuation Tables and Introduction - December 2011