Reserves vs Resources
The current value of a resource ounce is between $70 and $125 per ounce. With the pre-feasibility study done in Q3, some of our resource ounces will be upgraded to reserves. The current value of reserve ounces range between $130 to about $300 per ounce. So the question of a value put on our ounces in the ground for a buyout depends on the ratio between resource and reserve and of course, the terms of an offer. If we take a $98 median price for the resources and $215 for reserves, assume 2.2 million resource ounces with 800K reserve ounces we get a value of $3.20 per share in CDN. This does not take into account any additional ounces added between now and the pre-feasibility study. I believe more than ever we will be able to shop this property around as containing 10 million ounces with potential for more, so any estimate of a final buyout price would be pure speculation. I am beginning to see now why Chet is putting every dollar into the ground since the final price a major will pay is dependent on the number of ounces they will replace in their acquisition of Oromin.
Caliche:
Using that math at just $98/resource ounce times 1.4 million should have us up
over $1.25 today? Why are we stuck in the pennies?
G1
LOL.. im sure we are all thinking the same thing.. the market doesn’t always assign full value to every stock. This is how the market works sometimes, there are undervalued stocks and overvalued stocks, Oromin is severely undervalued even with the 1.4 million ounces we have on the books already. Thats why i wasn’t worried buying at .39 in Dec. I just wish i could have bought more!!
We will make our $$ when the market assigns full value to our shares, until then i will buy what i can afford and accumulate!
If that is just for what is in the ground, then how does the Sabodala operation get its value? The would seem the natural melt with the oromin ground.
Sabodala. 1.63 x 215 for $350 M CAD
1.87 x 98 for $183 CAD, total $533M CAD plus there is a new $250M plant there….
So is MDM actually worth $533 plus $250 for $783M….1.70 sh CAD…..Just for Sabodala alone?
Therefore, should I top up here, sell out when its taken over soon and then pile it into OLE?
That would give me an even bigger upside…..unless the results coming out are really good….so go OLE now, take the uplift in Feb, tip back into MDM, Take the uplift in March/Apri, tip back into OLE and then wait for further results ?????
Muttley,
they are very rough calculations and i use them for comparison only. The MDL numbers should be netted of debt for the plant, and adjusted for any hedged ounces. Either way both Oromin and MDL are undervalued at the current share prices.
warmest regards
caliche
To bad we do not have 100% ownership in this venture. By my math that would make this a real whooper but even at 42.5% we are looking a very good pay day.
agreed!!
My apologies if I missed this in another post. What determines the difference in how something is classifies as a resource or a reserve? Why the ratio of 2.2M and 800k? Thanks!
From my understanding a resources = a probable projection from drilling that has not been verified by a 3rd party.
A reserve is when the resource has been verified as mine-able by a 3rd party thus we can get it out of the ground.
Thank you. By that definition and the 3rd party involvement in the calulations, would our 1.4M ounces not be considered a “reserve” or is further verification necessary?
dumb question,,,, why is a Resource valued so much higher than a Reserve… $98 vs $215. ?
you’d think the other way around…. with resources needed to be confirmed,,, and more costs involved?
sorry , i goty it wrong. I guess we have 1.4 in confirmed Gold. Whatefver that is called in a Term…. but I was thinking what we have in Hand would be valued higher than what we Think is in the Ground.. madke sense?
Still resource b/c they needed further data to confirm the amount of “reserve”. We will get reserve numbers in the next estimate.
It all has to do with drill spacing and probabilities, our current resource is drilled at 40 m spacing.. we are now doing infill drilling in between the 40 m centers at 20 meters so the probability of continuity is greater .. the feasibility study will separate reserve ounces from resource so we will have some reserve ounces and some resource.. i will post a link to a paper explaining all of this as soon as i find it..
warmest regards
caliche
mino, to take your response one step farther a reserve is mineable
at a profit
Ed,
Sorry for the confusion, i was using a total of 3 million ounces as an example of a valuation for oromin if 800K of those ounces were reserve and 2.2 mil resource. Usually ounces are booked as resource and upon further drilling mineralogical testing etc classified as reserve and will therefore garner a higher value in a buyout.
This should help explain things
http://www.northern.org/artman/publish/pdfs/Resources%20v.%20Reserves.pdf
A bank will give you money to devbelop a reserve, a punter will give you money to develop a resource into a reserve….
Great information and I appreciate the help with the clarification! Going back to Goldn1’s comment. If you use 2M ounces as our next number on the soon to be released resource calc and $100 as the value for all 2M ounces as a “resource”, the valuation for OLE is more than double what it is trading for today. If you use $215 as the value for all 2M ounces assuming they will reach “reserve” status, OLE would be pushing $3 a share. If Caliche is right and we get to 5M ounces or 10M ounces, why are people not backing up the truck and buying more or where are the new buyers. 5M ounces of “reserve” gets us over $7 a share!! do people still perceive Oromin as high risk? Are they skeptical of how many ounces are in the ground?
I know there is a lot of money on the sidelines and when it is triggered to return to the markets i think gold and gold shares will be valued WAY higher than they are now .. what the trigger will be and when i dont know.. oil and gold are the best places to be right now!!
Ed…I think something else you have to consider is that ever large financial institution, brokerage and banking, are in a capital “preservation” mode right now. That being the case investing in junior miners doesn’t necessarily fit the profile that they are looking for.
With that said, I do believe that mgmt and investor relations could do a better job sparking private interest from large family offices and the such.