I loved that reading and reinforces why I love the company. Maybe waiting to 65 cents is too optimistic and may jump in early tomorrow. It is hard to sit with money on the side when you love a company this much. I have to say I love them almost as much as I loved watching my Montreal Canadiens kick NOvechkin out of the playoffs!!
Go Habs Go!!
Go CMM Go!!
Here is reprint of that article:
Estimating Century Mining Corporation Fair Market Valuation
By Dennis Boyko
Created on: March 16, 2010
Current version 0.22: April 8, 2010 -- added a chart symbol key.
Metrics have been updated with closing prices available on 2010-Apr-28.
Fair Market Valuation Summary - 2010-Apr-28
Projected fair market stock price for Century Mining Corporation, based on the current NI 43-101 resource disclosures, is C$4.01. The actual closing stock price was C$0.78.
Century Mining Corporation is a stock in recovery. As Lamaque production starts up in Q2 2010, the stock price has an above average probability of generating an extraordinary gain from March 2010 price levels. This valuation does not assign any value to the Alaska Properties, NWT Properties and the Colina Dorada property in Peru.
Quoting from the Century Mining Corporation's September 30, 2009 MD&A:
The Company's assets at Lamaque and San Juan are very good projects and the potential to realize significant shareholder value from these existing assets is excellent.
I strongly agree with the company's assessment.
Details
At the close of trading on and based on NI 43-101 reports available in March 2010, the current and projected Market Capitalization per ounce of Gold Equivalent for Century Mining Corporation, were:
The average ore value per tonne was US$187.59.
Projected fair market stock price for Century Mining Corporation is derived using the projected fair market valuation at start of production of US$352.26 per ounce of Au Eq (as derived above) and the following assumptions:
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Capital Expenditure for mine development: US$0M -- Given that upgrade costs at San Juan are just $1.5M and Lamaque is already financed through private placements at the end of 2009, further financing is assumed to be unnecessary. Also the company has close to 40M warrants outstanding from the December 2009 private placement with a strike price of $0.30 which will at some point be converted into stock thus generating working capital for the company.
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Risk Premium: 0% applied to the capital expenditure,
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Discount Factor: 15% -- set to account for the 61% of reserves in the Inferred category. However, this is also conservative given the excellent recent drill from the Bedard Dyke at the Lamaque Gold Mine which are not part of the current NI 43-101 compliant estimates.
The discounting of the future gold metal prices after the start of production is already fully accounted for in the Gold Producer Valuation Line which is derived from current day market prices and company fundamentals from a number of established gold producers.
Discussion
The supporting model and the calculations used to produce the projected fair market stock price are detailed in Fair Market Price Calculations.
This blog does not assign any value to potential for organic growth on current Century Mining Corporation properties or future acquisitions by the company.
The fair market valuation of Century Mining Corporation illustrates the extent to which start-up gold producer such as Century Mining Corporation can be undervalued by the market. The excellent ore value that the company holds is not consistent with current pricing. As production start-up at Lamaque, I expect that some of the risks the market has used to discount the current stock price will be proven wrong.
The Lamaque mine in terms of reserves and resources compares very well to some of the best mines held by Agnico-Eagle. Century Mining Corporation as a whole would no doubt be an excellent addition to Agnico-Eagle. Consider:
Wild Speculation
Agnico-Eagle's La Ronde mine is just up the road from Lamaque. I would not be surprised to see a future move by Agnico-Eagle to do a friendly take over Century Mining Corporation in a deal along the lines of:
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Agnico-Eagle makes an all share offer for Century Mining Corporation at a 40% (or x%) premium to a recent close.
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Current Century Mining Corporation shareholders receive 1 share a new company for every 20 shares (or y shares).
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The new company holds all of the current Century Mining Corporation properties except for the Lamaque Mine.
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Agnico-Eagle holds 10% (or z%) of the new company.
Certainly, this is wild speculation on my part. However, Century Mining Corporation is currently too cheap relative to the known problems and the excellent ore grades. Of course it might not be Agnico-Eagle. Any number of other mid-tier gold producers with an interest in a Canadian deposit might make a like offer.
Glorieux
