I had a conversation with Gold01 on SH about Earnings per share and share price calculation.

That would be his calculation:

Base fundamentals

Annual production target: 10,000 Oz gold net to XBR
Gold price: $ >1,700/Oz
OpEx: $ 100/t – approaching zero with silver credits (by-product)
Corporate tax in Mexico: 30%
Number of shares: 49mm plus 33mm warrants/options = total 82mm


Theoretical fundamentals incl. “air bags”

Annual production target: 9,000 Oz gold only net to XBR
Gold price: $ 1,600/Oz
OpEx: About 4 tons ore have to be milled to produce 1 Oz of gold. Using OpEx of $ 100/t = $ 400 per Oz of gold. I do not consider the silver credits (by-product). Further I add $ 200/Oz for administration and other expenses which could occur for the JV-company in Mexico. The total OpEx used: $ 600/Oz
Number of shares: increased to 90mm incl. warrants/options (in case of another share placement)

EPS estimation for the year 2013
$ 14,400,000 revenue (sale of 9,000 oz gold)
- $ 5,400,000 OpEx
- $ 2,000,000 depreciation, exploration, administration, financial expenditures
= $ 7,000,000 EBT
- $ 2,100,000 tax
= $ 4,900,000 total net earnings
= $ .054 EPS
Share price target until end of 2013: $ .54 (= 10x earnings multiple)
Price potential: 217% (based on a buy @ .17)

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And this was my reply:

Hey Gold01, thanks for your calculations. Although I like your "airbag approach", let me tweak it a little bit.

And these would be my points for tweaking:

a. Your OpEx of $ 600 seems a little bit to much on the high side, especially if you don´t account for the silver credits. Therefore I would leave it at $ 600/tonne OpEx but would include the silver to the revenue figure.

b. I would reduce the 10K ounces to 8k to apply a cautious recovery rate to the ore extraction process.

c. The estimated metal grades for the area are around 8-10 gpt Gold and 200-250 gpt Silver.

For example the Guapo vein with 1.5m width would contain 20 gpt Gold and 550 gpt Silver, hand samples from the Infantita vein came in with astonishing grades of up to 961 gpt Gold (!!!) and 1829 gpt Silver (!!!),

To be on the cautious side, I would average at 8 gpt Gold (gets us your 4 tonnes material per ounce mined) and 150 gpt Silver.

d. Metal prices would be on a cautious side (at least for PM bulls, haha): $ 1600 Gold, $ 30 Silver

e. According to my conversation with Tim Gallagher, XBR has enough accrued operating loss so far, to avoid taxation "for the forseeable future". Therefore I would omit the estimated taxes of 30%.

f. Last point would be the fully diluted shares, which have increased to 95M including the recent financing.

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So my calculation would be as follows:

1. Gold Revenue per tonne: 8 gpt / 31.1g (=1 oz.) = 0.2573 x $ 1600 = $ 412 / tonne

2. Silver Revenue per tonne: 150 gpt / 31.1 = 4.8232 x $ 30 = $ 144 / tonne

3. Total Revenue: $ 412 + $ 144 = $ 556 / tonne

4. Net Revenue: $ 556 / t - $ 150 / t (= $ 600/ oz. total OpEx ) = $ 406 / tonne

4. Mined tonnes = 250 tpd x 310 days operation = 77.500 t / year - 20% recovery loss = 62.000 t / year

5. Net Value mined: 62.000 t x $ 406 / t = $ 25.2 million

6. XBR gets 49% = $ 12.35 million earnings

7. Earnings per share (EPS) = $ 12.35 M / 95 M shares fd = 0.13 (even with 30% taxes, EPS = 0.095)

8. The market would value producers at 10-12 earnings multiples, but let´s get on the cautious side again and apply a 5 times earnings multiple. That would give us a "minimum fair value" of $ 0.65 / share (with a 100% upside based on 10x earnings multiple, which would be market average).

And if Tim uses half of the cash flow and gets the production up to 750 tpd, this would lead to a triple in share price from this really cautious approach. But do your own math !

At least, that´s what I expect from 2013 onwards: a share price around the $ 0.65 level and an annual dividend of $ 0.01 - 0.03 per share.

FANTOMAS

P.S.: If I would have applied Gold01´s 10x earnings multiple, I would look at a share price around $ 1.30 !!!