Valuation Metrics of Canadian Gold and Silver Miners

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Gwyde
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Valuation Metrics of Canadian Gold and Silver Miners

When dealing with mineral rights of mining enterprises, Canada has its NI 43-101 Metal Valuation Report, a standard for mining companies to comply with when reporting on their reserves and resources. Those documents are stored and can be retrieved from the repository at http://www.sedar.com/
To make thing easier and allow comparison in a glance, the website ‘Gold Miner Pulse’: gives a fair overview of many Canadian Gold Mining Valuations. There are also specific Valuation Reports for the companies reported on.

On this blogthread, I'm focussing on the gold and silver miners covered by 'Gold Miner Pulse'. Whereas this is a strict limitation, the Gold Miner Pulse database is nevertheless covering a wide range of miners: several bellwethers are included: Agnico-Eagle, Barrick, Eldorado, Kinross, Yamana to name a few. The database also covers a number of intermediate or small miners and further on a wide range of precious metal explorers and explorer-developers.

Limiting our scope to miners of the Gold Miner Pulse database has the advantage of having a uniform approach on miners complying with the same regulatory framework: things get comparable.

Composite score

The added value of this thread is the miners spreadsheet where a composite valuation score is included. (The miners spreadsheet is updated on a regular basis.) It is not a straightforward task to define a reliable composite score indicator. In my attempt to do so, I consider four metrics:

  • Market Cap/Oz
  • Total Au-Eq (or Ag-Eq) resource estimate
  • Ore value per tonne
  • Repartition between reserves and resource categories

You find more detail on this in following two blogposts. Valuation Metrics of Canadian Gold and Silver Miners and Canadian Gold and Silver Miner valuation Metrics - Update

The miners spreadsheet enables narrowing down the choice to a reduced number of Canadian miners. Avoid drowning in data and do your own due diligence on just these miners.

Outlook

Gold and silver miners have been underperforming precious metals for most of 2011. Autumn is however a seasonally strong period for precious metals and for miners. Miners are now valued far cheaper than almost any moment since the precious metals started recovering from a twenty year bear market back in 2000. As investors start realizing that high gold prices are not a temporary parabolic anomaly but are there to stay, miners will be monitored and bought instead of neglected and sold. 

Edited by admin on 11/08/2014 - 06:20

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Goldminer pulse is one of the

Goldminer pulse is one of the sites i like to stop in and look for bargains in the miners. However there is a lot more to valuing stocks than by simply using  these metrics unfortunately. I wish it were that easy. Management is a huge asset, and stocks like UXG get a significant % of their valuation from a management aspect.

Then there is debt - assets, if you have debt greater than your in situ metal value, you cant compare that company to one that has similar metal value but no debt and 200 million in the bank...

Some companies ( RVM for instance) have huge meas and indicated resources, but only 7 years in proven and probable reserves. It does not mean the resources couldnt be moved up, in RVM's case it means there is no rush to move them up. As development continues the cost to move some of these resources into reserves from measured and  indicated is far less once  waste material is moved and the company is sitting on sufficient capital so that borrowing or dilution is not necessary.

All these miners are not created equal. Some have narrow vein systems, deep and difficult to mine, so their ore numbers may not be indicative of a hugely profitable mine, whereas a large scale openpit with similar resource numbers but lower grades, may be multiples more profitable.

Then there is country risk. 

So while this site is a good place to start your due diligence and get your ideas, it is not a surefire approach for valuing miners.

ALL jmho

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This is a very good idea for

This is a very good idea for a thread. Thank you. I may inject some thoughts into the discussion as well. For now I will just be reading! laugh

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Gwyde...

I am very pleased to see that you have finally started this thread!...You are a treasure trove of knowledge...& there is so much to learn!...If anyone wants to follow Gwyde's work...here is the link to the last post at Kitco (work your way back)!...

https://www.kitcomm.com/showthread.php?t=67230&page=187

Welcome to TF Metals Gwyde!!!...

Bag Of Gold

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Miners unchained

Miners unchained


Hiring came a grinding halt, illustrating the US economy is gliding back into recession. A scary image for stock markets which were selling off with losses over 2.5% on S&P and Nasdaq. As often during a stock market sell-off, the greenback held up, firming against most currencies.
Precious metals cease to move in correlation with stock markets lately. Since the stock market slide aggravated in August, the opposite seems to be true: gold is rallying at a stock market swoon. A paradigm shift?

Today's PM rally is impressive: gold is up $57 or 3.1% to close at $1882. Silver jumps $1.75 or 4.2% to $43.25.
Miners seem unchained and edge higher, no longer spooked by the stock market sell-off: on our GMP list, gains outnumber losses by an impressive 9:2 margin.
The gold miners index is up 3.2% to 1041. The silver miners index firms 2.44% and the equal weight index is up 2.6%.

Double digit gains for:

  1. American Bonanza Gold Corp.
  2. Mines Management Inc.
  3. Crazy Horse Resources Inc.

A nice 9.4% rally also for Semafo, one of the dogs of our GMP list.

Yet those gains are balanced by double digit losses for:

  1. Galantas Gold Corporation
  2. Plato Gold Corp.

and among majors, Silvercorp Metals Inc. is remarkably the victim of selling pressure (short selling on rumors ?) with a 9.72% slide.

Good WE - (as last posted on the Kitco forum on the thread: Miners Due Diligence Center)
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Valuation spreadsheet and Miners indices,
Valuation metrics in GoldMinerPulse, intro to the Canadian Gold and Silver Mining database.

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Saved by the majors
Saved by the majors

European markets opened positive after Monday's swoon, yet gains evaporated as Wall Street opened in the red and most European markets ended the day down 0.5% to 1%. Wall Street mitigated losses towards the close and ended likewise, with the S&P down 0.74%.
After yesterday's close above $1900, gold posted an ATH on Asian markets, but a smack down at the LME opening spoilt confidence, though the London PM fix was again above $1900. It required a second selling wave around noon on NYMEX to make gold surrender. We closed the day at $1873.6, down $27. As compared to Friday we're down only 0.5% or $8.6, which is more illustrative for what the miners 'feel'. Silver was down $1.37 or 3.2% as compared to Friday, ending at $41.88.
On the GMP list, we have losses outnumbering gains by a tiny 8:7 margin, which is a success considering the stock market and PM headwinds. Moreover our GMP gold miners index is saved by the majors, progressing 1.16% to 1051. The silver miners index edges up 0.17%, but the equal weight index is down fractionally.

Exeter Res. is the star of the day with a 15.5% gain. Two penny stocks (ATG, LMG) are down double digits.

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mouser wrote: Goldminer pulse

mouser wrote:

Goldminer pulse is one of the sites i like to stop in and look for bargains in the miners. However there is a lot more to valuing stocks than by simply using  these metrics unfortunately. I wish it were that easy. Management is a huge asset, and stocks like UXG get a significant % of their valuation from a management aspect.

Then there is debt - assets, if you have debt greater than your in situ metal value, you cant compare that company to one that has similar metal value but no debt and 200 million in the bank...

(...)

Then there is country risk. 

So while this site is a good place to start your due diligence and get your ideas, it is not a surefire approach for valuing miners.

ALL jmho

I can't agree more, that's why I suggested using the GoldMinerPulse list to narrow down your choice and do a proper due diligence on your selection. You will find many of your arguments confirmed in the page long caveat sections of the two blog posts I linked to in the opening post. (Sorry for hiding essentials in there, but I dislike lengthy posts with copy/paste work mainly.)

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A paradigm shift?

A paradigm shift?


Quote:
Originally Posted by Gwyde View Post
(...)
Precious metals cease to move in positive correlation with stock markets lately. Since the stock market slide aggravated in August, the opposite seems to be true: gold is rallying at a stock market swoon. A paradigm shift?

Today stock markets rallied, pretty much across the globe. The 'paradigm shift' I have been mentioning seems to uphold in the opposite direction as well. We had another gold smack down, most peculiarly initiated during Asian market hours.
Gold lost $56 or 3% to end at $1818, while silver lost only a quarter (or 0.6%) to $41.63. Miners sympathized with the good market sentiment; we have gains outnumbering losses 2:1 on our GMP list. The gold miners index is up 0.15%, while silver miners firm by 0.6%. The equal weight index is up 0.35%.
It's a funny contradiction: during months miners ignore the precious metals rally and underperform grossly. As gold finally recedes, miners respond to the upside...

Penny stock 'Cream Minerals' was the starlet of the day with an 18% jump.

 

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Gwyde...

Gwyde wrote:

A paradigm shift?


Quote:
Originally Posted by Gwyde View Post
(...)
Precious metals cease to move in positive correlation with stock markets lately. Since the stock market slide aggravated in August, the opposite seems to be true: gold is rallying at a stock market swoon. A paradigm shift?

Today stock markets rallied, pretty much across the globe. The 'paradigm shift' I have been mentioning seems to uphold in the opposite direction as well. We had another gold smack down, most peculiarly initiated during Asian market hours.
Gold lost $56 or 3% to end at $1818, while silver lost only a quarter (or 0.6%) to $41.63. Miners sympathized with the good market sentiment; we have gains outnumbering losses 2:1 on our GMP list. The gold miners index is up 0.15%, while silver miners firm by 0.6%. The equal weight index is up 0.35%.
It's a funny contradiction: during months miners ignore the precious metals rally and underperform grossly. As gold finally recedes, miners respond to the upside...

Penny stock 'Cream Minerals' was the starlet of the day with an 18% jump.

 

Yes!...Cream Minerals is finally moving!...Thanks for adding Nautilus Minerals Inc to your list!...This one's a "sleeper"...& should do quite well!!!...

Bag Of Gold

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Gwyde wrote: A paradigm

Gwyde wrote:

A paradigm shift?


(...)
We had another gold smack down, most peculiarly initiated during Asian market hours.
Gold lost $56 or 3% to end at $1818, while silver lost only a quarter (or 0.6%) to $41.63. Miners sympathized with the good market sentiment; we have gains outnumbering losses 2:1 on our GMP list. The gold miners index is up 0.15%, while silver miners firm by 0.6%. The equal weight index is up 0.35%.
It's a funny contradiction: during months miners ignore the precious metals rally and underperform grossly. As gold finally recedes, miners respond to the upside...

9/8/11

Chart of the day is...

...the GDX and GDXJ five day showing against silver, gold and the Dow:

http://incakolanews.blogspot.com/2011/09/chart-of-day-is_08.html

“ Well blow me down, the miners are actually winning for once.”

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Negative stock market correlation holds up

European stock markets could hold on to some modest gains, but for Wall Street the bounce is over. American stock markets turned negative around noon, losing over 1% on the Dow and S&P and 0.8% on the Nasdaq, with the greenback firming and the euro now below $1.39. Precious metals were up with gold firming by a whopping $52 or 2.9% to $1869.5 and silver up a more modest 80ct or 1.9% to $42.35. The negative stock market correlation holds up, despite the greenback firming.

Miners didn’t respond to stock market weakness today but chose following precious metals, with gains outnumbering losses 8:3 on our GMP list. The gold miners index is up 2.1%, the silver miners index firms by 1.6% and the equal weight index by 1.84%. There’s quite some volatility among miners, with a series of double digit gains for:

  1. Rye Patch Gold Corp. (+21%) – Star of the day
  2. Chesapeake Gold Corp.
  3. Pacific Rim Mining Corp.
  4. Golden Queen Mining Co. Ltd.
  5. Claude Resources Inc.
  6. Alexandria Minerals Corporation

And a number of double digit losses for:

  1. Lincoln Mining Corporation
  2. NovaGold Resources Inc.
  3. Gowest Amalgamated Resources Ltd.
  4. Atlanta Gold Inc.
  5. Soho Resources Corp.
  6. Primero Mining Corp. (-13.8%) – Swoon of the day

Investors had second thoughts on the higher capex expected for the Donlin Creek project which Novagold develops in partnership with Barrick. NG is down 10.7% on TSX.

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Just a note on Novagold. They

Just a note on Novagold. They put out a presser yesterday saying that costs to get the Donlin Creek mine up and running will now be about 6 billion up from 4.5 billion.

Also, costs to pull an oz out of the ground. Says that costs have risen from the 2009 feasibility study for now above $900 an oz. But does not specify the costs increase.

Says a new feasibility study should be out later in the year.

IMHO The deposit is too huge, plus has way too much copper not to mine it. This may be why Novagold bought that copper mine recently. Perhaps to offset increasing costs to mine the gold at other mines?

http://www.novagold.com/section.asp?pageid=19006

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End of a winning streak
End of a winning streak

Landslide losses on stock markets today, with discord at the ECB (Jürgen Stark, their main economist resigned) on the sovereign bond purchases sparking fear in the markets. On some European markets there are losses in excess of 4% for major market indices. Very few stocks escape the downdraft. Wall Street isn't a lot better, with losses of over 300 pt on the Dow, a loss of about 2.7% (and a similar one for the S&P).
The greenback firmed as it usually does at a stock market sell-off with the Euro as a predictable main victim.
Gold lost $11 or 0.6% to $1859.6, while silver lost close to $1 or 2.3% ending at $41.38. Severe headwinds for our miners with the gold miners index ending a 5 days winning streak. The gold miners index is down 1%, the silver miners index sheds 2.2% and the equal weight index is losing 1.1%. (Could have been worse...)

We have losses outnumbering gains 8:3 on our GMP list today.
Cream Minerals and Golden Queen Mining make countertrend double digit gains. There's double digit losses for penny stocks Soho Resources, Pacific Rim Mining Corp. and Mountain Boy Minerals.

I added this weeks' data to the GoldMinerPulse page. With gold up 38% since Nov 19 ,the inception of the GMP gold miners index, this index is up only 6.6%. Silver miners aren't any better: the silver miners index did progress by 14.8%, yet the white metal soared 71% since last Nov. There's still 44 miners in the red over nearly 10 months. Better is to come...

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Bloodshed and falling knives

European stock markets had another bloodred day with losses over 3% on many places. Wall Street started in the red but percentage losses showed less despair. A rally during the last trading hour brought market indexes into positive territory. Feels kind of dodgy with a PPT signature... but it does keep up the negative correlation with PM markets, selling off big. Gold quoted at $1815 shortly after 4pm: a 2.3% loss. Intraday the $1800 came awfully close. Silver quoted $40.31: a $1.07 loss or 2.6%, while intraday the POS dropped below $39.8.

Bloodshed and falling knives among miners, with losses outnumbering gains 7:2 on our GMP list. The gold miners index is off 3.4%, the silver miners index is off 3.9% and the equal weight index sheds 2.55%.
Some major silver miners go deep in the red: Silver Standard Resources Inc., First Majestic Silver Corp., Silvercorp Metals Inc. lose 7.3%-9.6%.

Double digit losses for:

  1. Claude Resources Inc.
  2. Eco Oro Minerals Ltd.
  3. Plato Gold Corp.
  4. Atlanta Gold Inc.

Yet two penny stocks make double digit gains: Laurion Mineral Exploration and Mountain Boy Minerals Ltd.

... I'd rather not look at my balance today.

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Miners get little help from PM recovering

Miners get little help from PM recovering


Asian markets were down this morning, but sentiment turned cautiously positive in Europe during the day with gains to end the day with after the terrible slide. Wall Street could confirm with a 0.9% gain on the S&P and 1.4% on Nasdaq.
Precious metals recovered after yesterday's slide with gold ending at $1834, up 1% and silver at $41.04 up 1.8%. Miners get little help from PM recovering though: on our GMP list gains outnumber losses by a tiny 7:6 margin. Moreover several Canadian large cap miners post a loss for the day, making the (cap weighted) gold miners index shed 0.46%. The silver miners index is almost flat: +0.07% and as such miners underperform the metals again  . 

There is quite some volatility among miners with five double digit gains:

  1. Soho Resources Corp. (+50%)
  2. Paramount Gold and Silver Corp.
  3. Crazy Horse Resources Inc.
  4. Cream Minerals Ltd.
  5. Century Mining Corporation

As for double digit losses... the demise of Silvercorp is the talk of the day on the forum.

  1. Silvercorp Metals Inc. (-20%)
  2. Laurion Mineral Exploration

Top gains for a few juniors pull the equal weight index into positive territory: +1.25%

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Four day losing streak among miners

Recovery on European markets finally got traction with a convincing gain over 3% on the German DAX. Wall Street recovered from an early loss, gaining almost throughout the session but end off the highs. Gains of 1.35% on the S&P and 1.6% on Nasdaq make this the third gain on a row. PM were selling off, confirming their negative stock market correlation that started showing up after QE officially ended and markets started sliding.
Gold lost 0.8% and silver slided 0.9% causing a four day losing streak among miners, with losses outnumbering gains 5:2 on the GMP list. The gold miners index is off 1.3%, the silver miners index is down just 0.5% and the equal weight index loses 0.8%. Gold mining majors are down collectively. The HUI index barely holds the 600 level.

Few extreme variations today:

  1. Century Mining Corporation
  2. Crazy Horse Resources Inc.

are off double digits, giving back yesterday's gain.
Seabridge was bashed on SeekingAlpha and sold off over 5%.

On the opposite side penny stock Plato gold was up double digits.
Silvercorp recovered (only) 3.7% of yesterday's 20% slide, off $1 from the day's high! Several investigations are announced.

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GMP gold miners index plunging into the red

We 've got another day of the same recipe: broad stock markets have been rallying pretty much across the globe as though times were good and economic hardship is coming to an end. On Wall Street main indices gained from 1.34% (Nasdaq) to 1.72% (S&P). The greenback responded with weakness getting the upperhand again and precious metals sold off (reponding to the negative stock market correlation of late and bucketing dollar weakness).

Gold is down $30 or 1.6% to $1790 and silver is down 78cts or 1.9% to $39.91.
Headwinds for the miners of our GMP list with losses outnumbering gains 3:1 and extending their losing streak to 5 days. The GMP gold miners index is plunging into the red ending 999, down 1.3%; the silver miners index is down 1.94% and the equal weight index sheds 1.44%. You will find an update of the GMP indices and miner performance disparity on the GoldMinerPulse blogpage: http://gwyde.blogspot.com/p/gold-miner-pulse.html

No double digit moves today. Silvercorp recovered another 7% after its 20% slide on Tuesday.

HUI relative to gold has been sliding back last week as miner losses again exceeded the gold slide. The previous support of 0.34 on the HUI/Gold has become a resistance level. Pretty much the same conclusion for the SIL:Silver ratio back down to 0.66.

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Romios Gold

That is why Romios Golds drill results are so important.  If they have the drill results that everyone thinks they will, it will make Novagolds project way more economically feasible.  Romios Golds deposit is right where Novagolds mill will be built and closer to where they would transport the ore. Buy Romios now because once they release their drill results in the next 1-3 weeks, it will never see sub $0.50 ever again.  Nova would be stupid not to buy them immediately after the results because it would be a game changer for Nova!!

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Love this thread!

Hi Gwyde, so glad you're set up in Turd Town, I just caught up on the thread and like the way you recap the days action with winners and losers both. I also note the high level of discourse from you as well as the folks who choose to post or comment.

Gold Miner Pulse is a fabulous TOOL, and Dennis Boyko is to be thanked and commended. I would not want to have to do the ongoing updates he does, that's for sure! But as pointed out nicely above, picking winners isn't just based on valuation metrics. The comment about using GMP to do research and create a hit list is exactly right, to me, that is its true strength and benefit to an investor like me and probably many others here.

Again, welcome. And thanks for "bringing it"!  I can see why BOG gives you so much street cred cool

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Bookmarked

For all the reasons ewc said.

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Nice Thread!!

I lurk. cool

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