Balmoral Resources has an exciting portfolio of highly prospective exploration properties in the Abitibi region, but when we made our initial investment in the company, it was to gain exposure to Balmoral’s Grasset Deposit.
In March of 2016, Balmoral Resources published the initial resource estimate for Grasset: Contained NiEq (lbs) = 136,270,000
Now I want to play a game called, “What’s the rock worth?”
F/D Share Structure = 147,035,026
Fully-Diluted Market Cap = 23,525,604
Nickel Price at Time of Writing = $6.94/lb.
Theoretical Projected Annual Ni Production = 5,492,333 lbs.
Market Cap Valuation per Resource Lb.
= 17 Cents Market Cap Value per Lb.
In other words, each lb. in the ground is valued at 17 cents by Market Cap.
Share Price Valuation by Resources in the Ground
Each share represents .93 lbs. Ni. Hence, each share is worth $6.43 of Ni in the ground.
Market Cap as a Percentage of Resources in the Ground
Value of Resources = US $945,713,800
The Market Cap of Balmoral Resources is valued at ~2% of the resources in the ground at Grasset. This is low, even at today’s depressed Ni prices. There is room for significant Market Cap appreciation at higher Nickel prices.
Nickel-Based Market Cap Valuation
= US $141,857,070
The current valuation of Balmoral Resources is low, even at $6.94 Ni. Someday, the Invisible Hand will take notice and revalue its shares.
Balmoral Resources hasn’t released a PEA for Grasset, so we are going to utilize a conservative AISC of $5/lb. to calculate its near-future Cash Flow Multiple and Future Cash Flow @ $8.75/lb. Ni and theoretical projected annual production of 5,492,333 lbs.
Near-Future Cash Flow Multiple
= 2.2% (Near-Future Cash Flow @ $6.94/lb. = US $10,655,126)
Future Cash Flow @ $8.75/lb.
= US $20,596,248
Future Market Cap Growth
Future Market Cap = US $119,236,250
Future Market Cap Growth Percentage = 407%
Taking only Grasset into consideration, Balmoral Resources has a medium-term upside of ~400%. We have a target of US $0.85 a share.