jsr Posted December 1, 2010 Report Share Posted December 1, 2010 I recently brought this one, and here's why ... Carpathian Gold is a near term production company, with two main projects, Riachos Dos Machados (RVM), and the Rovina Valley Project (RVP). Firstly, a little about the projects - RDM is a past producing mine in Brazil, capable of production of 100,000 ounces Gold per annum, with projected cash costs of $428/ounce according to their preliminary economic assessment. On top of this, the mine has 812,000 ounces in the measured and indicated category and growing. Now get this, the mine is yet to have results of it’s full feasability study, but they look to have secured all the funding they need to put the mine into production. They recently engaged in a $51.6 million brought deal financing with an investment sydicate between Cormarck, Canaccord, Hayward, and Jennings Capital. Essentially, this means some well known institutions have actually gone long on Carpathian’s shares. As well as this, they have arranged a $30 million gold stream financing deal, of which $7.5 million already received, and a $75 million financing facility with the Macquarie Bank. The last, is a $$22 million financing from CAT, for equipment. Now, all this financing does have some conditions, such as a put/call collar structure for a proportion of gold produced (I will update the structure when the deal becomes more apparant), and the completion of a feasability study, which I do not see any issues with, given this is a past producing mine. http://www.carpathiangold.com/site06/Default.aspx?tabid=226 RVP is a larger project in Romania which has 759 million lb copper deposit, and 3.07 million ounces of gold, both in the measured and indicated categories. Combined, this is a gold equivalent of 5.23 million ounces. The PEA suggests costs of $379 per ounce gold, with copper as a by-product. Value Now, say for instance management were to dump the RVP project (which they won’t), I think it would fetch between $129-155 million on the market, perhaps more if the buyer was enthusiastic of their inferred mineral category. The company has a market cap of $240 million (428m share fully diluted @ 56 cents). Now for argument sake, lets give RVP a half way value of $140 million. This means you are only paying $100 million for a company projected to produce 100,000 ounces per year. Plus two Hungarian exploration properties thrown in free! Or to value another way, $44 per gold equivalent ounce. For small cap producers, $150 per ounces is more reasonably sounding. I recently brought a half position in Carpathian at 56 cents. The reason being I wasn’t sure if the market would pull back or head higher. Either way, it’s a hedge if it goes higher, and I’ll buy more if it pulls back. PS - Visit my blog for future coverage and other gold stocks. Link to comment Share on other sites More sharing options...
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