Deep Yellow Limited | Reptile Project, Namibia | Hybrid Model Investment Case Update: or, FCM 5-Level Valuation Analysis (Strict)

TAC15 & TAC10 are discrete proprietary price-value points at which an acquirer might consider Deep Yellow. PMCV15 & PMCV10 are proprietary price-value point models that are supplementary to Projected Book Value per Share. If there are broad discrepancies between PMCV Variants & Projected Book, it typically signals erroneous bankable data or miscalculations on the part of FCM. In the case of Deep Yellow, the numbers do not reconcile very well, which likely stems from an underestimation of CapEx and/or AISC. Needless to say, Reptile is a Project without a PEA, so many assumptions were made in an effort to complete this valuation series.

GoviEx and Fission — The Case for Outsized Returns (Idle Jottings)

There are mounting indications that the generally accepted high probability of continued losses in the uranium sector has been priced in. Which is to say, the medium- and long-term expected value for staunch bears is now negative, while the medium- and long-term expected value for long-suffering bulls is now positive, although the curia’s perceived probability of gains remains low.

The bears have been correct for a long time although the frequency of their correctness and magnitude of wins have declined, with a handful of exceptions.

GoviEx and Fission are two examples of names that may enjoy upside returns of a magnitude greater than those of peers, as shorts have been more frequently correct though concomitant returns have been somewhat diminished. This is a tell-tale sign of wanton complacency in the aforementioned names.

I want to own names like these whose returns are potentially a full order of magnitude greater than their peers as a result of outcomes that fly in the face of higher probability, albeit moderately-to-extremely priced-in, outcomes.

$LRTNF : Pure Gold Mining — FCM Independent Stock Valuation Analysis

Base Case = $1,400
Flagship Project = Madsen, Red Lake, Ontario, Canada
Fully Diluted Shares = 289,300,000
Fully Diluted Market Cap (25 March 2019) = U.S. $127,292,000
Resource Base (Probable Reserves: Madsen) = 1 Mozs
Resource Base (Indicated Resource: Madsen+) = 2,060,000 ozs
Head Grade = 9.0 g/t
LOM = 12 Years
Average Annual Production = 90,000 ozs
AISC = U.S. $787/oz
CapEx = U.S. $70,807,804
Capital Intensity = U.S. $71/oz
Cost Structure = 60%

Market Cap Valuation per Probable Resource Ounce = U.S. $127/oz
Market Cap Valuation per Indicated Resource Ounce = U.S. $62/oz

90% and 95% discounts respectively to spot gold. The valuation of Pure Gold’s Resources (Inclusive of Reserves) is still fairly low (U.S. $62/oz). At higher gold prices ($1,400+), considerable appreciation of value is possible.

Share Price Valuation by Resources in the Ground (Indicated) = 0.007 ozs

Were there fewer shares or more ounces, Pure Gold would be valued higher, but keep in mind the spectacular grade of Madsen, as well as the relative unimportance of this metric.

Resource Valuation as a Percentage of Market Cap (Indicated) = 5%

The Market Cap is valued at ~5% of the the value of the resources in the ground. This is low and bodes well for Pure Gold’s Market Cap growth.

Discount to After-Tax NPV @ $1,400 = ~60%
NET Cash Flow (LOM) = U.S. $591,232,196
Future Cash Flow Multiple = 4.6
Future Market Cap Growth = 364%
Projected Market Cap = U.S. $590,172,000

Proprietary Stock Valuations

Projected Book Value per Share = U.S. $2.04/sh.
PMCV15 = U.S. $1.49/sh.
PMCV10 = U.S. $1.00/sh.
TAC (Reserves) = U.S. $985,000,000 U.S. $3.33/sh.
TAC (Indicated) = U.S. $1,819,309,600 U.S. $6.15/sh.
TAC15 (Indicated) = U.S. $272,896,440 or U.S. $0.92/sh.

$PNRL : Paringa Resources TAC 15 Analysis

Low cost, under-the-radar 1/50 US ADR with a tiny free-float could surprise on the upside as coal production ramps up and long-term sales contracts are signed.

PARINGA RESOURCES (1/50 US ADR)

COST TO ACQUIRE = US $0.26/TONNE
COST TO BUILD = US $0.33/TONNE
AISC = US $29.24/TONNE

TOTAL ACQUISITION COST = US $29.83/TONNE

PRICE TAG* = US $599,135,550 OR US $84.74/SHARE

PARINGA RESOURCES (50/1 ASX LISTING)

COST TO ACQUIRE = AUD $0.42/TONNE
COST TO BUILD = AUD $0.47/TONNE
AISC = AUD $41.25

TOTAL ACQUISITION COST = AUD $42.14/TONNE

PRICE TAG* = AUD $846,381,900 OR AUD $2.39/SHARE

*Free-Float Methodology