What is NOVO's current gold-in-the-ground value per share?
Including warrants and options, NOVO has 64.4 million fully diluted shares as of March 31, 2013.
On May 1, 2013, NOVO announced an inferred resource of 421,000 troy ounces gold contained in 8.9 million tonnes at a grade of 1.47 grams gold per tonne. Over 400,000 ounces in the ground divided by 64 million shares is over .00625 ounces of gold per share.
How are the costs of turning gold ore into gold metal determined?
The new "all-in sustaining cash cost" basis of producing gold is explained in a recent essay on 321gold.com: "Gold-Mining Margins 3," by Adam Hamilton,
May 03, 2013 (Copyright ©2000-2013 Zeal Research All Rights Reserved.)
Among the seven major miners that so far have divulged these figures, their "all-in sustaining cash cost" of producing an ounce of gold averaged $1,046 . Subtracting that figure from the May 3, 2013 gold price of $1,470 yields an average profit for those miners of $424 per ounce, or 40%.
Assuming NOVO eventually also would have a profit of over $400 per ounce, the net value per share of the over 400,000 ounces NOVO has discovered so far would be about about $2.50 (.00625 ounce of gold per share x $400 net profit per ounce) .
COMMENTS:
(1) Given that NOVO will be using open-pit mining and near-by new mill for processing its ore, NOVO's all-in sustaining cash cost could be much less than that of many major gold miners. Assuming NOVO's cost is less than $600 an ounce, then its current gold-in-the-ground per share value would be more than $5.40 (.00625 ounce per share x $870 net profit per ounce).
(2) Some believe the world price for gold currently is over-sold. At a gold price of, say, $2,000 an ounce and a NOVO cost per ounce of less than $600, NOVO's share value would be about $8.75 (.00625 ounce per share x $1,400 net profit per ounce).
(3) These calculations refer only to the gold NOVO has discovered so far. Assuming Quinton's theory is correct (which I do), the gold so far inferred by NOVO is but a tiny fraction of the gold potentially existing in the over 700 square miles of area available to NOVO for exploration.
REK
