So compare.

Trailing Earnings

Trailing earnings should be, based on some 14k oz. production at an average of $1670/oz. Net And Comprehensive Earnings in addition to Q4 earnings for the end of the year, as a wild guess based on the forward-looking $8m. operational deficit, will wind up making ~$8m.

You have to account for the forward-looking operational deficit for Q1, fiscal 2013, which should be ~$8m.

Add prior Net And Comprehensive Earnings, you get ~$12m. Net And Comprehensive Earnings for the year.

Divide by the net oustanding number of shares, 284,743,755, you get trailing earnings of 4¢ a share. That means that the stock would be worth ~40¢ on a fair value basis.

Forward Earnings

If, however, the company paid out ~4¢/share dividend, since they are in an operational surplus and all imaginable costs were taken care of, then you would have to price the shares based on forward earnings.

Dynamic hedging strategies based on the Black Scholes options pricing model, parries the monies gained selling the miner and buying long-dated treasury bond option, would have to look at the stock price differently, according it forward earnings, instead of trailing earnings.

"From these assumptions, Black and Scholes showed that “it is possible to create a hedged position, consisting of a long position in the stock and a short position in the option, whose value will not depend on the price of the stock.”[5]

Several of these assumptions of the original model have been removed in subsequent extensions of the model. Modern versions account for changing interest rates (Merton, 1976)[citation needed], transaction costs and taxes (Ingersoll, 1976)[citation needed], and dividend payout.[6]"

It can be the reverse, where it is possible to create a hedged position, consisting of a short position in the stock and a long position in the option, whose value will not depend on the price of the stock.

A dividend payout however, will require forward earnings assumptions.

So, if the average realized gold price was $1649/oz., then you would be assuming a 17% premium over the next year as your average realized price for fiscal 2013. $1649/oz. X 1.17% = $1929/oz.

Gold production will increase to 70k. oz. per year. So you get ~$135m. for 2013. Costs will be in the range of $900/oz. X 70k. Costs should be on the order of ~$63m. That implies that Net And Comprehensive Earnings on a fully diluted basis could be as much as ~$70m/ 338,150,756shares = ~21¢ share. A fair value of 10P/E would mean $2.10/share. (if you used negative discounting on costs, that would reduce the fair value of the stock.)

This would also trigger the outstanding warrants and result in a surplus.

Melt-up Risk

There is a very significant melt-up risk to GBN.V stock, because the volatility assumptions in Black-Scholes do not account for increases in production, gold price, and possible dividend yields.

Interest rates can decline further at the long end of the curve, but not much more than 1%, so negligible effect. However, dividend yields can increase from 10% (4¢/share) to over 33% not something expected in the calculation.

Sean Boyd - Agnico

http://www.bloomberg.com/video/91596470/

Rob McEwen - McEwen Mining

http://www.bloomberg.com/video/91595736/

-F6