PRB/TRR Comparison

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goldhunter11

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PRB/TRR Comparison

posted on Mar 24, 2012 07:13PM

This analysis is similar to a previous post by LT/Mark but looking from a slightly different perspective. Please feel free to jump in to correct any flawed argument/reasoning. Also, please check my math ($1 calculator from a dollar store).

Facts (as I found them from NR and presentations, correct them if you have more up-to-date info)

Indi Infer I +Inf Cap Cash Net Cap OS SP

TTR 0.930 5.940 6.87 404 86 318 177 2.28

PRB 0.305 3.775 4.06 91 33 58 65 1.42

Net Cap = Cap – Cash. For TTR $86M assumed (30 Sept 2011); PRB $33M

(Note: Hoping that the table format would be retained when I copy and paste on the BB)

Location and jurisdiction: good and stable in both cases.

Average grade: Comparable, cut-off grade: the same @0.30 g/t

- TRR: 0.82 Indicated, 0.91 Inferred

- PRB: 0.90 Indicated, 0.90 Inferred

Deposit depth: Comparable

Deposit size ratio TTR/PRB: 6.87/4.06 = 1.7 (total resource)

Deposit size ratio TTR/PRB: 0.930/0.305 = 3.05 (indicated resource)

Comparison using simple math

- Net Cap ratio TTR/PRB: 318/58 = 5.48 (same deposit size assumed)

- Weighted net Cap ratio 1: 5.48/1.7 = 3.2 (per oz of Au, using total reserve)

- Weighted net Cap ratio 2: 5.48/3.0 = 1.8 (per oz Au, using indicated reserve)

From the above the following conclusions could be drawn

1. If PRB had the same total deposit size (with the new 101 report) then the current valuation is grossly under value, say by a factor of 5 compared to TRR. TTR should be in the market cap around $350 M for Borden Lake alone (ignoring BC, LSG, and Goldex 5% NSR). With 65 M OS PRB SP should be in the range $350 M/65 M= $5.4/s (assuming a resource of 6.87 M ozAu just like the current TRR deposit. If the new 101 report says 10Moz total (even inferred) then SP should be $5.4/s x 10/6.87 = 5.4 x 1.46 = $7.8/s.

2. Using the 1.7 factor (per oz Au of total resource) then the SP for PRB = $5.4/1.7 = $3.2/s

3. Using the 3.0 factor (per oz Au of indicated resource) then the SP for PRB = $5.4/3 = $1.8/s which is closer to the SP of $1.25 to 1.42/s during last week. The reason for the higher value of almost 2x for TTR is due to the market/RBC analysts perception of the indicated resource, i.e. until PRB has something near 1 Moz Au in the indicated category (like TRR) it will not have any respect, as reflected in the SP. The conservative people seem to be saying “we will believe it when we see it, or …show us the money”. So, the new 101 report with updated indicated resource from the infilling drill data should help pushing the SP up. Fingers crossed for something close to 1M oz.

4. Also, there is something magic (again to get some respect) about 10 Moz total resource, but I will just leave it here for you to speculate.