Someone on the other board asked how I do these calculations. I'm repeating my answer here, in the interests of transparency:

(cash flow in a given year) = (value of production) - (production costs) - (refining costs)

To bring the cash flow from year 'n' (that is a year 'n' years in the future) to the present time, discount it at the rate you choose:

(cash flow)/(1+rate)^n

Lay it all out on a spreadsheet. Add up the value of the years and you have a NPV estimate of the market cap. Divide by the number of shares, fully diluted of course, and you have your NPV estimate of the share price.

You can get more sophisticated, varying cash flows, rates, inflation, estimated borrowing costs, etc., but I think this fairly simple method can go a long way to telling you what a company is worth, complete with the level of risk you want to assign to the investment. I certainly like it better than $/oz in the ground, or multiples of present cash flow.

The beauty of spreadsheets, Slug, is that they make it easy to answer your question. Just pop in the numbers, and:

0.5 oz/t, $662 Gold:

$4.02/share 10% DR

$5.82/share 7% DR

$7.73/share 5% DR

0.5 oz/t, $934Gold:

$6.55/share 10% DR

$9.40/share 7% DR

$12.42/share 5% DR

0.6 oz/t, $662 Gold:

$5.25/share 10% DR

$7.56/share 7% DR

$10.01/share 5% DR

0.6 oz/t, $934 Gold:

$8.28/share 10% DR

$11.85/share 7% DR

$15.64/share 5% DR

Clearly, grades have as significant a role in the profitability as the POG. We can have some more fun with the sheet, too. Let's say that in 2017, they upgrade the milling capacity to 2,400 t/d at a cost of $10M. What then? Well, production would increase to ~333,000 oz/y at a cost of around $236/oz. This then results in estimated NPV's of:

0.4 oz/t, $662 Gold:

$3.31/share 10% DR

$4.95/share 7% DR

$6.71/share 5% DR

0.4 oz/t, $934 Gold:

$5.67/share 10% DR

$8.38/share 7% DR

$11.29/share 5% DR

Up the grades, and you then get:

0.6 oz/t, $662 Gold:

$6.18/share 10% DR

$9.11/share 7% DR

$12.27/share 5% DR

0.6 oz/t, $934 Gold:

$9.72/share 10% DR

$14.26/share 7% DR

$19.14/share 5% DR

Lots of blue sky here, and you don't have to stray that far from the highly probable to see it.

D.