$UUUU : Energy Fuels — Independent Economic Analysis

Long-Term Price Case$65/lb. U308 $65/lb. U308
ProjectNichols RanchAlta Mesa
Mineral Resources7,195,000 lbs.3,617,000 lbs.
Shares Outstanding93,500,00093,500,000
Market Cap$287,980,000$287,980,000
Average Annual Production630,000 lbs.575,000 lbs.
LoM10 Years6 Years
Payable Product6,359,000 lbs.3,182,960 lbs.
True All-in Cost (TAIC)$41.36/lb.$38.61/lb.
Gross Revenue$413,335,000$206,892,400
Gross Income$380,331,790$190,372,838
Total Operating Cost($69,376,690)(34,726,094)
Operating Profit$310,955,100$155,646,744
Income Taxes($26,707,800)($13,368,432)
Total Capital Costs ($89,725,490)($44,911,566))
Restoration & Reclamation($16,024,680)($8,021,059)
JV Allocation($17,487,250)
Net Income$150,326,760$83,998,314
Net Profit Margin36%41%
Absolute Cost Structure (ACS)64%59%
True Value$2.51/sh.
Cash Flow Multiple10x
Annual Cash Flow$14,893,200$15,174,250
Future Market Cap$300,674,500
Future Market Cap Growth4%

Notes: All Values in U.S. Dollars

Fahy Capital Management has enjoyed a 90% return on Energy Fuels, but we think the stock is overvalued by almost every measure at current levels. We are sellers.

$MGDPF : Marathon Gold — Independent Economic Analysis

Long-Term Price Case$1,700/oz.
Flagship ProjectValentine Lake
Mineral Resources2,691,400 ozs.
Shares Outstanding159,431,702
Market Cap$145,082,849
Average Annual Production225,092 ozs.
LoM12 Years
Payable Product2,701,100 ozs.
True All-in Cost (TAIC) $1,383/oz.
Gross Revenue$4,591,870,000
Reid & Keats Royalties($436,227,650)
Gross Income$4,155,642,350
Total Operating Cost($1,643,000,000)
Operating Profit$2,512,642,350
Income Tax($1,130,689,058)
Total Capital Costs ($525,000,000)
Net Income$856,953,292
Net Profit Margin19%
Absolute Cost Structure (ACS)81%
True Value$5.38/sh.
Cash Flow Multiple5x
Annual Cash Flow$71,354,164
Future Market Cap$356,770,820
Future Market Cap Growth146%

Notes: All Values in U.S. Dollars

$VGZ : Vista Gold — Independent Economic Analysis

9-20-19 Updated PFS Analysis
Long-Term Price Case$1,700/oz. Aux
Flagship ProjectMt. Toddx
Mineral Reserves5,848,000 ozs.x
Shares Outstanding100,500,000x
Market Cap$80,400,000$82,410,000
Average Annual Production381,231 ozs.413,400 ozs.
LoM13 Yearsx
Payable Product4,956,000 ozs.5,305,000 ozs.
True All-in Cost (TAIC) $1,413/oz.$1,429/oz.
Gross Revenue$8,425,200,000$9,018,500,000
Refinery Costs($15,763,000)x
JAAC Royalty($64,425,000)x
Gross Income$8,345,012,000$9,018,500,000
Total Operating Costs($3,122,004,000)($3,422,467,700) [Inclusive of JAAC Royalty and Refining Cost)]
Operating Profit (EBITDA)$5,223,008,000$5,596,032,300
NT Royalty($1,044,601,000)($1,119,206,460)
Income Tax($1,566,902,400)($1,678,809,690)
Total Capital Costs($1,191,290,000)($1,361,888,000)
Net Income$1,420,214,600$1,436,128,150
Net Profit Margin17%16%
Absolute Cost Structure (ACS)83%84%
True Value$14.13/sh.$14.29/sh.
Cash Flow Multiple5x5x
Annual Cash Flow$109,413,297$110,588,867
Future Market Cap$547,066,485$552,944,335
Future Market Cap Growth580%571%

Notes: All Values in U.S. Dollars

$VNNHF : Belo Sun Mining — Independent Economic Analysis

Long-Term Price Case$1,700/oz. Au
Flagship ProjectVolta Grande
Mineral Reserves3,788,000 ozs.
Shares Outstanding442,631,915
Market Cap$84,100,064
Average Annual Production205,155 ozs.
LoM17.2 Years
Payable Product3,524,100 ozs.
True All-in Cost (TAIC) $900/oz.
Gross Revenue$5,990,970,000
CFEM Royalty($42,240,000)
Gross Income$5,948,730,000
Total Operating Costs($2,488,640,000)
Operating Profit$3,460,090,000
Income Tax($155,060,400)
Total Capital Costs($486,086,900)
Net Income$2,818,942,700
Net Profit Margin47%
Absolute Cost Structure (ACS)53%
True Value$6.37/sh.
Cash Flow Multiple5x
Annual Cash Flow$164,124,000
Future Market Cap$820,620,000
Future Market Cap Growth876%

Notes: All Values in U.S. Dollars

$MISVF : Minco Silver — Independent Economic Analysis

Long-term Price Case$24/oz. Ag
Flagship ProjectFuwan
Mineral Reserves55,300,000 ozs.
Shares Outstanding60,704,748
Market Cap$27,317,137
Average Annual Production5,500,000 ozs.
LoM9.2 Years
Payable Product50,323,000 ozs.
True All-in Cost (TAIC) $19.80/oz.
Gross Revenue$1,207,752,000
Gross Income$1,159,441,920
Total Operating Costs($313,800,000)
Operating Profit$845,641,920
Total Capital Costs($73,059,822)
Net Income$211,585,336
Net Profit Margin18%
Absolute Cost Structure (ACS)82%
True Value$1.35/sh.
Cash Flow Multiple5x
Annual Cash Flow (TMRC, 30%)$23,100,000
Future Market Cap$115,500,000
Market Cap Growth323%

Notes: All Values in U.S. Dollars

$TMRC : Texas Mineral Resources — Updated Economic Analysis

Flagship ProjectRound Top
Mineral Resources (M&I)307,260,007 kg REOs
Shares Outstanding46,686,252
Market Cap$14,005,876
Average Annual Production10,754,100 kg
LoM20 Years
Payable REOs215,082,005 kg
True All-in Cost (TAIC) $21.43/kg.
Gross Revenue$7,764,424,000
Texas State Royalty($487,476,000)
Gross Income$7,276,947,000
Total Operating Costs($2,213,683,000)
Operating Profit$5,063,264,000
Total Capital Costs($845,000,000)
Income Taxes($1,063,285,440)
Net Income$3,154,978,560
Net Profit Margin41%
Absolute Cost Structure (ACS)39%
True Value (TMRC, 30%)$20.27/sh.
Cash Flow Multiple5x
Annual Cash Flow (TMRC, 30%)$47,324,678
Future Market Cap$236,623,392
Market Cap Growth1,589%

Notes: All Values in U.S. Dollars

Update, 9 September 2019

Gustavson’s August 2019 revisions to the Round Top PEA had a negligible impact on Fahy Capital Management’s independent analysis. In fact, the updated PEA is more in line with our own assumptions. Consequently, we don’t feel compelled to revise our expectations.

$SSPXF : Sandspring Resources — Independent Economic Analysis

Long-Term Price Case$1,700/oz.
Flagship ProjectToroparu
Fully-Diluted Shares315,544,790
Fully-Diluted Market Cap$47,331,719
Average Annual Production198,158 AuEq ozs.
LoM24 Years
Payable Product4,755,793 ozs.
True All-in Cost (TAIC) $1,287/oz.
Gross Revenue$8,084,848,100
Transportation & Insurance($91,881,921)
Treatment Charges($50,458,964)
Refining Charges($24,302,102)
Gross Income$7,915,304,079
Guyana Au Royalty($530,984,288)
Guyana Cu Royalty($9,178,680)
One-Time Surface Owner Royalty($27,060,462)
Net Revenue$7,348,080,649
Total Operating Costs($3,127,124,129)
Operating Profit$4,220,956,520
Income Taxes($1,266,286,956)
Total Capital Costs($992,000,000)
Net Income$1,962,669,564
Net Profit Margin24%
Absolute Cost Structure (ACS)75%
True Value$6.22/sh.
Cash Flow Multiple5x
Average Annual Cash Flow$81,839,254
Future Market Cap$409,196,270
Future Market Cap Growth765%

Notes: All Values in U.S. Dollars

New Direction — Say more with a lot less.

We are taking our approach to the valuation of businesses in a new direction.

Many metrics, including those that measure resources relative to shares or market cap, have proven of exceptionally low utility, so they will be left by the wayside, as will be quick and dirty market cap valuation methodologies in which the divisor is company shares.

We will be discontinuing the Deep Value Grading System, as well, as it too easily lends itself to misinterpretation.

Basic cash flow analysis will take a back seat to a new costing methodology that leverages our experience with and passion for cost accounting: True All-in Cost (TAIC). Four additional valuation metrics extend therefrom: True Value, True Value Discount, Absolute Cost Structure (ACS) and MTQ Score.

The following key metrics will now represent the chief means by which we arrive at determinations concerning value:

True All-in Cost (TAIC)
True Value*
True Value Discount (TVD)
Absolute Cost Structure (ACS)
MTQ Score

Although we have devoted a great deal of time to the development of our acquisition formulas (TAC), they too have proven of too little essential everyday value to support unless we find ourselves in a situation that requires the valuation peculiarities that set them apart, including their spot price independence.

*True Value shouldn’t be misconstrued as a Price Target. Our targets are based upon projected annual cash flows to which a multiple is assigned; the multiple is determined by analyzing Net Profit Margin and Absolute Cost Structure.

Occasionally, at our discretion, we will publish a Target in addition to True Value.

Final Thoughts (They are never final.)

Historically, our valuation methodologies have utilized fully-diluted shares. We are actively considering transitioning to a Free-Float methodology in order to better anticipate future tendencies of price.

$TSRMF : Treasury Metals — An Independent Economic Analysis, Wherein is Introduced a New Metric: Absolute Cost Structure

Long-Term Price Case$1,700/oz. Au & $24/oz. Ag $1,600/oz. Au & $22/oz. Ag $1,500/oz. Au & $20/oz. Ag $1,400/oz. Au & $18/oz. Ag
Flagship ProjectGoliath Goliath Goliath Goliath
Ownership100% 100% 100% 100%
Mineral Resources (Measured & Indicated)1,174,668 AuEq ozs.1,173,099 AuEq ozs.1,171,320 AuEq ozs.1,169,287 AuEq ozs.
Fully-Diluted Shares192,845,004 192,845,004 192,845,004 192,845,004
Fully-Diluted Market Cap$34,712,101 $34,712,101 $34,712,101 $34,712,101
Average Annual Production90,100 AuEq ozs.90,041 AuEq ozs.89,974 AuEq ozs.89,898 AuEq ozs.
Recovery95.5% 95.5% 95.5% 95.5%
Payable Product1,171,294 AuEq ozs.1,170,531 AuEq ozs.1,169,667 AuEq ozs.1,168,679 AuEq ozs.
LoM13 years 13 years 13 years 13 years
True All-in Cost (TAIC) $1,006/oz.$979/oz.$953/oz.$927/oz.
Gross Revenue$1,991,199,800$1,872,849,600$1,754,500,500$1,636,150,600
Smelting & Refining($5,890,560)(5,618,549)(5,263,502)($4,908,452)
Total Operating Costs($613,751,040) ($613,751,040) ($613,751,040) ($613,751,040)
Operating Profit$1,376,859,200$1,253,480,011$1,135,485,958$1,017,491,108
Total Government Taxes and Royalties($357,983,392)($325,904,803)(295,226,349)($264,547,688)
Total Capital Costs ($200,675,520) ($200,675,520) ($200,675,520) ($200,675,520)
Net Income$818,200,288$726,899,687$639,584,089$552,267,900
Net Profit Margin41%39%36%34%
Absolute Cost Structure (ACS)59%61%64%66%
True Value $4.24/sh.$3.77/sh.$3.32/sh.$2.86/sh.

Notes: All Values in U.S. Dollars

Were Goliath in production at $1,400/oz. Au, it would earn roughly 34 cents on every dollar it collects. From there, Net Profit Margins improve incrementally as the fundamental gold picture improves. An Absolute Cost Structure (ACS) of 66%* makes this possible. What is more, the ACS declines by ~11% as gold prices move from $1,400 to $1,700. It is this factor which underpins the improvement in Net Profit Margins.

We have learned to shy away from enterprises (catastrophes?) that cannot manage to rein in their ACS, but Treasury Metals is an example of a future gold producer that makes the cut.

*You’ll see plenty of ballyhooed Before-Tax Cost Structures below 50%, but they aren’t an accurate representation of reality. If you can find a gold producer with an ACS under 70%, you may have stumbled upon a real gem, though abiding by non-GAAP in your analysis won’t help you find gems. Which is to say, one must find new methodologies that enable one to push beyond AISC & All-in Costs in pursuit of extended valuation factors such as Absolute Cost Structure.

$ABBRF : AbraPlata — Updated Independent Economic Analysis

Long-term Price Case $24/oz. Ag & $1,700/oz. Au
Flagship Project Diablillos
Ownership 50%
Mineral Resources66,425,000 AgEq ozs.
Shares Outstanding82M
Market Cap$3,599,800
Average Annual Production4,919,765 AgEq ozs.
Payable Product39,358,121 AgEq ozs.
LoM8 Years
True All-in Cost (TAIC) $17.59/oz.
Gross Revenue$944,594,904
Total Charges ($28,337,847 )
Royalty NSR ($9,445,949)
Net Revenue$906,811,108
Total Operating Costs($279,674,860)
Operating Profit $627,136,248
Income Taxes ($219,497,687)
Total Capital Costs($155,479,000)
Net Income$252,159,561
Net Profit Margin27%
Absolute Cost Structure (ACS)73%
MTQ Score (Higher is Better) 0.4
True Value$3.08/sh.
True Value Discount (TVD)99%
Cash Flow Multiple5x
Net Annual Cash Flow$31,535,694
Future Market Cap$157,678,470
Future Market Cap Growth4,280%

Notes: All Values in U.S. Dollars

According to our calculations, the AbraPlata story gets interesting above $17/oz. Ag. If Aethon has a breakthrough and is able to demonstrate that recoveries above 80% may be achieved, the AbraPlata story could get interesting below $17/oz. It’s a wait-see.

The Net Profit Margin and Absolute Cost Structure are middling, so we have assigned AbraPlata a 5x Cash Flow Multiple and Future Market Cap Growth up to 4,280%.

Merger Update: 30 July 2019 — Jane pays John to take her to prom…

On a fully-diluted in-the-money basis, AbraPlata shareholders will own ~48% of Diablillos following a business combination with Aethon.

As our assumptions were within a +/- 5% margin of error (+4%) regarding future ownership, our existing valuation dated 20 June 2019 remains valid, for all intents and purposes.