$UUUU : What is Energy Fuels Worth Today (and Tomorrow)?

Near-Term Price Case$8.30/lb. V205 & $24.90/lb. U308
Resource Base (M&I)91,821,000 U308Eq lbs.
Fully-Diluted Shares93,500,000
Fully-Diluted Market Cap$287,045,000
Market Cap Valuation per Resource Pound$3.13
Share Price Valuation by Resources in the Ground.98 ($24.45)
Resource Valuation as a Percentage of Market Cap13%
Market Cap Valuation$342,951,435
Future Market Cap ($65/lb.)$895,254,750
Future Market Cap Growth212%
PMCV15 (Projected Market Cap Valuation at 15%) Price Case= $65/lb. U308$9.57/sh.
PMCV15 (Projected Market Cap Valuation at 15%) Price Case= $55/lb. U308 $8.10/sh.
PMCV15 (Projected Market Cap Valuation at 15%) Price Case= $45/lb. U308 $6.63/sh.
PMCV15 (Projected Market Cap Valuation at 15%) Price Case= $35/lb. U308 $5.16/sh.
PMCV15 (Projected Market Cap Valuation at 15%) Price Case= $25/lb. U308 $3.68/sh.

Notes: All Values in U.S. Dollars

By Market Cap, each U308Eq lb. in the ground is presently valued $3.13, which is ~13% of spot. The low valuation is a reflection of the persistent bear market in which U.S. producers find themselves. On the other hand, Energy Fuel’s Share Price Valuation by Resources in the Ground reflects the substantial underlying value of the company’s shares, which is a function of a tight share structure: each share represents a peer-beating .98 lbs. of resources, or $24.45 of U308Eq in the ground. That alone is an indication of true value.

Energy Fuel’s Market Cap is presently valued at ~13% of the resources in the ground. This is fairly good and suggests considerable Market Cap appreciation is possible at higher spot prices. This factor has risen in recent months as a result of both speculation about the outcome of Section 232 and slightly higher uranium spot prices.

Finally, Energy Fuels is trading at ~80% of a Market Cap that we consider a full representation of the company’s fundamental value relative to today’s spot uranium price. This is unique, in that, as a consequence of a share structure with a roughly 1:1 ratio with its U308 Equivalent resource base, the company sports a fluid Market Cap that very closely tracks spot uranium movements. Consequently, one can get a good sense of the Market Cap at which the company will be trading at a handful of escalating spot prices, absent significant dilution and/or resource depletion (See Table Above).

$MUX : Putting a Price Tag on Los Azules

We think a would-be acquirer is in a position to drive a hard bargain for McEwen Mining’s Los Azules porphyry copper project in San Juan, Argentina. In order to calculate our estimated offer price, we’ve utilized AuEq ozs. and the following current spot prices: $1,332/oz. Au, $14.70/oz. Ag and $2.66/lb. Cu. Our Total Acquisition Cost at 10% (TAC10) assumes an AISC of ~$1,240/oz Au.

Total Estimated Payable Resources (AuEq)25,986,778 ozs.
Gross Revenue$34,614,388,296
Treatment and Refining Charges($2,684,000,000)
Royalties($1,010,000,000)
Initial CapEx($2,363,000,000)
Sustaining CapEx($1,509,000,000)
OpEx($15,385,000,000)
Closure Costs($200,000,000)
Net Pre-Tax Cash Flow$11,663,388,296
Taxes($5,608,000,000)
Net After-Tax Cash Flow$6,055,388,296
Los Azules Inc.
Theoretical Market Cap$3,461,438,830
Cost to Acquire$133/oz.
Cost to Build$91/oz.
OpEx (LoM)$1,015/oz.
Total Acquisition Cost$1,240/oz.
TAC10 (Total Acquisition Cost at 10%)$3,221,703,827

Notes: All Values in U.S. Dollars

The Total Acquisition Cost for Los Azules factors in all TCs & RCs, Royalties, Taxes, and Closure Costs, in addition to LoM OpEx.

$GUYFF : Guyana Goldfields — The Big Revaluation

Long-Term Price Case$1,500/oz.
Flagship ProjectAurora
Resource Base (M&I, Inclusive of Reserves)4,285,580 ozs.
Fully-Diluted Shares 177,549,145
Fully-Diluted Market Cap$118,957,927
DebtNil
Cash$36M
Recovery90.5%
Average Annual Production146,400 ozs.
AISC$1,225
Cost Structure92%
Strip Ratio10.9:1
Cash Flow$15,811,200
Future Cash Flow$40,260,000
Market Cap Valuation per Resource Ounce$28
Share Price Valuation by Resources in the Ground.02 ozs. ($32)
Resource Valuation as a Percentage of Market Cap2%
Market Cap Valuation$856,901,721
Cash Flow Multiple8x
Future Market Cap$964,255,500
Future Market Cap Growth711%
PMCV15 (Projected Market Cap Valuation at 15%)$5.43/sh.

Notes: All Values in U.S. Dollars

Guyana Goldfields has a terrible Cost Structure and industry-lagging strip ratio, but is still managing to eek out some cash flow. At higher gold prices, this will improve. The company’s current Market Cap is valued at roughly 2% of its in-ground resources, which suggests shares are considerably undervalued in spite of adversity at Aurora.

$TSRMF : Updated Treasury Metals Notes

Long-Term Price Case$1,500/oz. Au & $20/oz. Ag
Flagship ProjectGoliath
Resource Base (M&I)1,247,920 AuEq ozs.
Fully-Diluted Shares192,845,004
Fully-Diluted Market Cap$36,640,551
LoM13 Years
Average Annual Production90,000 AuEq ozs.
AISC$611
Theoretical Cash Flow ($1,333/oz.)$64,980,000
Future Cash Flow ($1,500/oz.)$80,000,000
Market Cap Valuation per Resource Ounce$29
Share Price Valuation by Resources in the Ground.006 ozs. ($8.62)
Resource Valuation as a Percentage of Market Cap2%
Market Cap Valuation$245,021,604
Cash Flow Multiple.5x
Future Market Cap Valuation$280,782,000
Future Market Cap Growth666%
PMCV10 (Projected Market Cap Valuation at 10%)$0.97/sh.

Notes: All Values in U.S. Dollars

Victoria Gold in the Crosshairs

Long-Term Price Case$1,500/oz.
Flagship ProjectEagle Gold Project
Resource Base (Proven & Probable)2,663,000 ozs.
Resource Base (M&I, Inclusive of Reserves)4,082,573 ozs.
Fully-Diluted Shares 953,000,000
Fully-Diluted Market Cap$295,430,000
Average Annual Production200,000 ozs.
AISC$700/oz.
IRR37% ($1,400/oz. Au)
Debt Coverage307%
Cash Flow$129,000,000
Future Cash Flow$160,000,000
Market Cap Valuation per Resource Ounce$72
Share Price Valuation by Resources in the Ground.004 ($5.71)
Resource Valuation as a Percentage of Market Cap5%
Market Cap Valuation$816,310,471
Cash Flow Multiple2x
Future Market Cap$918,578,925
Future Market Cap Growth211%
PMCV15 (Projected Market Cap Valuation at 15%)$0.96/sh.

Notes: All Values in U.S. Dollars.

The quality of the Eagle Project is presently reflected in its Market Cap. As a producer, we expect a modest re-rating. We also think there is a mounting possibility of a takeover in the next 6 months. We think an acquirer would pay about $600M for the company.

$EQXFF : Equinox Gold at-a-Glance

Long-Term Price Case$1,500/oz. Au
Resource Base (M&I — Inclusive of Reserves)8,897,869 ozs.
Fully-Diluted Shares701,602,510
Fully-Diluted Market Cap$638,458,284
Market Cap Valuation per Resource Ounce$72
Share Price Valuation by Resources in the Ground.01 ozs. ($9.42)
Resource Valuation as a Percentage of Market Cap5%
Debt Coverage85%
Cash Flow ($1,347/oz.)$91,310,000
Future Cash Flow ($1,500/oz.)$550,000,000
Market Cap Valuation$1,797,814,432
Future Market Cap$2,002,020,525
Future Market Cap Growth214%
PMCV15 (Projected Market Cap Valuation at 15%)$2.85/sh.

There is a lot to like about Equinox Gold. Each ounce in the ground is presently valued at $72 by Market Cap. This is low and indicates that one may still buy Equinox’s ozs. of gold at a discount. On the flip side, each share is only worth $9.41 of gold, resulting chiefly from share bloat. However, the quality of the ozs. may make this value factor of marginal bearing on the fortunes of the company.

Meanwhile, the present Market Cap is valued at but 5% of the resources in the ground, which suggests Equinox is deeply undervalued. In an ideal world, relative to the value of resources in the ground at 15%, the company would sport a minimum Market Cap of $1.8B at $1,347/oz. Au. Hence, there is a sound case for Market Cap appreciation.

Future Cash Flow at higher gold prices is substantial, reducing present Debt Coverage from a very manageable 85% to the point at which it becomes enviably immaterial.

Fahy Capital Management has been a happy investor in Equinox Gold from U.S. $0.79. We maintain an initial price target of $2.85/sh.

$BNNLF : Bannerman Resources, by the Numbers…

Long-Term Price Case$65/lb. U308
Flagship ProjectEtango
Fully-Diluted Shares1,135,000,000
Fully-Diluted Market Cap$34,050,000
Ore Reserve Estimate130,100,000 lbs.
CapEx$793M
Sustaining Capital$282M
AISC (FCM Estimate)$47/lb.
Average Annual Production7.2Mlbs.
Mine Life15.7 Years
Market Cap Valuation per Resource Ounce$0.26
Share Price Valuation by Resources in the Ground.11 lbs. ($2.71)
Resource Valuation as a Percentage of Market Cap1%
Market Cap Valuation$320,046,000
Future Cash Flow$129,600,000
After-Tax Net Cash Flow (LoM)$1,526,040,000
Future Market Cap$845,650,000
Future Market Cap Growth2,384%
PMCV10 (Projected Market Cap Valuation at 10%)$0.75/sh.

Notes: All Values in U.S. Dollars. Fahy Capital Management has had occasion to trade in and out of Bannerman, but we ceased to be long-term investors following last year’s massive dilution. Moving on…

We think we have developed an accurate AISC for the project that enables one to fairly value Bannerman as a future producer. As you can see, the numbers clearly show that Etango is an economic project at $65/lb. U308.

One worrisome metric, though not of exceeding importance by itself, is Share Price Valuation by Resources in the Ground. At present, each share of Bannerman represents a mere $2.71 of uranium in the ground. By way of comparison, each share of peer Forsys Metals represents $13.78 of uranium in the ground.

In a word, don’t you want the shares you own to be of substantial intrinsic worth? Thanks to rampant dilution, each share of Bannerman isn’t worth much of the payable uranium they purport to represent.

$ALO : Alio Gold Notes

Long-Term Price Case$1,500/oz. Au & $20/oz. Ag
Flagship ProjectFlorida Canyon
Pipeline AssetAna Paula
Global Resource Base (M&I)4,700,584 AuEq ozs.
Fully-Diluted Shares97,500,000
Fully-Diluted Market Cap61,425,000
Market Cap Valuation per Resource Ounce$13.07
Share Price Valuation by Resources in the Ground.05 ozs. ($64.46)
Resource Valuation as a Percentage of Market Cap1%
Market Cap Valuation$942,702,121
Cash Flow$16,740,000
Cash Flow Multiple4x
Future Cash Flow$148,480,742
Future Market Cap$1,057,631,400
Future Market Cap Growth$1,622%
PMCV15 (Projected Market Cap Valuation at 15%)$10.85/sh.

Notes: All Values in U.S. Dollars. Alio remains deeply undervalued. On the back of ramped up production at Florida Canyon and future production at Ana Paula at $1,500/oz. Au and above, the company will be generating a lot of cash flow. For many investors, of which there are a host that are disillusioned, healthy future cash flows at Alio are hard to imagine, but mark my words, they are coming. Meanwhile, shares continue to trade at a hefty discount.

Hecla Health Check

Long-Term Price Case$1,500 Au & $20/oz. Ag
Global Resource Base9,788,907 AuEq ozs.
Market Cap (6 June 2019)$700,100,000
Market Cap Valuation per Resource Ounce$72
Share Price Valuation by Resources in the Ground.02 ozs. ($27/sh.)
Resource Valuation as a Percentage of Market Cap5%
Cash Flow$7,812,000
Future Cash Flow ($1,500/oz. Au)$97,650,000
Market Cap Valuation ($1338/oz. Au)$1,964,633,635
Future Market Cap ($1,500/oz. Au)$2,202,504,075
Future Market Cap Growth215%
PMCV15 (Projected Market Cap Valuation at 15%)$4.53/sh.

Notes: All Values in U.S. Dollars. Hecla is a troubled miner with an unsustainable cost structure and cash flow headwinds. That being said, the company has made some tough decisions that will enable it to slash spending and remain in compliance with the covenants, should it need to borrow under the revolver.

Fire Creek, Midas and Hollister are proving as challenging as expected, but Hecla continues to hang hopes on the Hatter Graben vein system, though full-on development will be curtailed.

Austerity is a response to adversity, and by and large, in light of Hecla’s misfortunes, it is appropriate. That being said, I believe Hecla should, in addition to surface drilling, forge ahead with development efforts at Hatter Graben, and tap the revolver conservatively, if necessary, in order to ensure that the development pipeline is robust when the market turns.

Tsumeb

…an unusual combination of complex geochemistry and development of a massive oxidation zone where supergene enrichment created a paradise for collectors and mineralogists. –Phil Persson

“Phil’s Top Ten Mineral Localities of the World,” The Collector’s Edge, 2017

Persson was referring specifically to the prolific Cu-Pb-Zn-Ag-Ge-Cd mine of the same name in the Oshikoto Region of Namibia, a region that will become of greater interest to Fahy Capital Management if a handful of stars align over the next few days.

The question that has been on every earth scientist’s lips is: could there be another Tsumeb deposit lurking undiscovered in the Otavi Mountainland? –Clive King

“An Introduction to the Geology of the Tsumeb Mine, Namibia,” Tsumeb.com

Underground mine Geologist, Clive King, for one, believes the Northern Carbonate Platform still has secrets to reveal.

Stay tuned!