It has been almost a year since I published my first "in situ" analysis of junior gold miners. I have also added several emerging gold producers to the analysis.

The "in situ" analysis compares the relative value of junior gold producers based on market capitalization (MC) and measured, indicated, and inferred (MI&I) reserves. Dividing MC by MI&I provides a dollar amount per ounce of reserves that is useful for identifying the most undervalued companies relative to one another.

The "in situ" analysis is just a first step and can be misleading regarding the valuation of companies with considerably more potential gold reserves than currently reflected in Canada's National Instrument 43-101.

For example, San Gold is at the bottom of this valuation technique with a much higher market cap relative to MI&I. This is misleading regarding San Gold's valuation. San Gold hasn't updated their MI&I since December 2006 when they reported 1.6 million ounces of gold MI&I. This analysis doesn't capture several extremely positive high grade drill results in the Hingeline zone near their mill that San Gold has recently reported here, here, here, here, and here. Investor's have bid the price of San Gold shares based on these promising drill results and Goldcorp's bonanza gold zone in the nearby Red Lake Gold Belt. Investors have recognized this potential by bidding up the share price. Several analysts recognize this potential as well.

Other companies similar to San Gold that are likely to have unreported and significant additional resources include Gold-Ore, Jaguar, Jinshan, Metanor, and others. If these companies continue to prove up resources at current share prices, they would become more undervalued using the "in situ" analysis.

Another limitation of using the MI&I standard is it does not include the value of polymetallic reserves sometimes found with gold deposits, including silver, zinc, copper and other metals. These non-gold reserves can be used to offset the production cost of mining and milling gold.

The "in situ" valuation technique complements cash flow multiple valuation and is only part of my overall assessment of these companies. Qualitative factors like political risk, currency exchange risk, property rights risk, remote site risk, single mine risk, operational risk, and management competence risk are also important considerations in evaluation junior gold producers.

The following is my analysis of 31 emerging gold producers using a market capitalization divided by measured, indicated, and inferred gold reserves based on closing share prices on May 12, 2009. The lower the dollar value, the more undervalued the stock is relative to others.

An interesting point made before by the Gold Stock Strategist and other observers is that the higher market cap companies generally receive a higher valuation in the market, probably due to a perception that larger is less speculative and safer. Thee data generally support that observation, though there are a few outliers.

My conclusion based on this analysis and other data is that "fair value" consolidations among juniors like the New Gold and Western Goldfields merger make a lot of sense and should be welcomed by junior gold mining investors.

I also believe that any company with MC/MI&I below $100 an ounce could be considered a "deep value" junior gold producer, especially if they are: (1) have a record of solid execution of their business plan, (2) are quickly ramping up gold production, and (3) have more than 2 million ounces of gold resource (MI&I).

COMPANY ............. MC/MI&I
1. Oceanagold................. $8
2. Kinbauri Gold............. $11
3. Gold-Ore Res............. $18
4. Vista Gold................... $19
5. Jinshan Gold.............. $20
6. Hawthorne Gold......... $20
7. ATW Ventures............ $28
8. Allied Nevada............. $30
9. New Gold.................... $31
10. Timmins Gold........... $33
11. New Guinea Gold...... $34
12. Metanor Res............. $38
13. Great Basin............... $41
14. La Mancha................ $43
15. High River................ $43
16. NovaGold.................. $46
17. MDN Inc................... $46
18. Castle Gold................ $52
19. Santa Fe Gold............ $56
20. Capital Gold............... $62
21. Alexis Minerals.......... $70
22. Claude Res................ $72
23. Richmont Mines....... $74
24. Troy Res ................... $96
25. Golden Star............... $105
26. Jaguar Mining........... $107
27. Minefinders............... $110
28. Aurizon Mines........... $119
29. Alamos Gold.............. $219
30. Gold Resource*......... $239
31. San Gold.................... $277

* internal gold equivalent resource estimate

This is another way to think about how to value emerging and current junior gold producers. I hope this is useful for readers."