Belo Sun Mining: FCM Advanced Resource Stock Valuation

Flagship Property: Volta Grande Project = 100% Ownership … 1 Point

Resource Base = 4,956,000 Au … 1 Point

F/D Share Structure = 465,589,915 … -1 Point

Recent Price = US $0.17

F/D Market Cap = US $79,150,286

After-tax IRR = 32% … 1 Point

NPV/CapEx = 287% … 1 Point

F/D Market Cap per Resource Ounce = $15.97 … 1 Point

In other words, each ounce in the ground is valued at $15.97 by market cap.

Share Price Valuation by Resources in the Ground

Each share is worth .01 Au ounces in the ground. In other words, each share is worth $13.52 Au in the ground.

Cost Structure = 61% … 1 Point

Cost Structure is less than 2/3 spot Au, so this is okay, but not great. At higher Au prices, this will matter less. Nevertheless, Belo Sun Mining will need to remain mindful of inputs to costs.

Resource Valuation as a Percentage of Market Cap

Value of Resources @ $1,270/oz Au = US $6,294,120,000

= 1.3%

In other words, the market cap is valued at 1.3% of the value of the Au resources in the ground. This is low. There is room for substantial market cap growth.

Near-Term Cash Flow = US $100,655,000 … Unrated

Near-Term Market Cap/Cash Flow = .8 (80%) … 1 Point

Future Cash Flow @ $2000/oz Au = US $376,305,000 … Unrated

Future Market Cap/Cash Flow = .21 (21%) … Unrated

Debt Coverage = 0 Debt … 1 Point

Projected Future Market Cap = US $1,486,800,000 … Unrated

Projected Future Market Cap Growth Percentage = 1,778% … 1 Point

Location: Pará State, Brazil … 1 Point*

*There is an interim suspension order related to Belo Sun Mining’s construction license. We may never know how FUNAI’s feathers got ruffled, but ruffled they got and Belo Sun Mining is paying the price. This has made investors wary of the stock, but not us. We know a bargain when we see one.

Conclusion

As my dad always says, “If you don’t take risks, you can’t get ahead.” We think of an investment in Belo Sun Mining as a calculated risk. At US $0.17, Belo Sun Mining has a Margin for Error that is palatable to us. And with a Projected Future Market Cap Growth Percentage of 1,778%, the opportunity is too great to pass up. While the cash-rich company is in a holding pattern, we want to take advantage of the likelihood that most uncertainty associated with Belo Sun Mining’s construction license has been baked into the shares. Agnico Eagle dumped its stake in the company, and this is an action of which risk-averse investors should be mindful, but it is not enough of a deterrent for Fahy Capital Management’s serious consideration. We think it may be time to deploy some speculative capital into the miner; we are buyers at US $0.17. We have a target of US $1.38 a share. Belo Sun Mining could conceivably be revalued upward at considerably higher Au prices, but we have applied a valuation penalty due to jurisdictional risk.

Score

9/11


Key

Flagship Project: 100% Ownership … 1 Point

After-tax IRR = > 20% … 1 Point

NPV/CapEx = > 1 … 1 Point

EV/Resources = < 1 … 1 Point

Cost Structure = < 50% … 1 Point

Resource Base = > 80 Mlbs. U308, 40M oz Ag or 2M oz Au;  … 1 Point

Future Cash Flow = Unrated

Near-Term Market Cap/Cash Flow = < 1x (100%) is Good; < .5x (50%) is Excellent… … 1 Point

Future Market Cap/Cash Flow = < 1x (100%) is Good; < .5x (50%) is Excellent… 1 Point

Share Structure = < 200 M … 1 Point

Debt Coverage = > 50% (or No Debt) … 1 Point

Projected Future Market Cap = Unrated

Projected Future Market Cap Growth Percentage = > 500% … 1 Point

Location: Friendly = 1 Point

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