hTTps://www.spglobal.com/marketintellig ... solidation.
Toast's point was if you valued GGP on the PFS reserve of 30% of 1.6mox at $436/oz then according to the PFS we are worth $209m. He fails to observe the new MRE or the conversion factor of 87% 'resources into reserves' touted many time by Shaun.. We've also seen the Grant Samual Havieron Telfer valuation of $500-600m - which the market has shrugged off - but that includes around $265m of rehab costs. It appears to values the project at $865m based on NCMs 70%. Most of the rehab costs are not relevant to GGP - well arguably maybe only about $30m. This appears to value GGP at $330m ( before the 8.4moz resource upgrade)
The average gold price when the SP document was written in 2021 was $1790
The change in average gold price over the past 50 years is outlined here: HTTps://www.macrotrends.net/1333/histor ... year-chart
Average Gold price 2021 $1790 -3.5%
Average gold price 2022 $1801 -0.2%
Average gold price 2023 $1940 +12%
Average gold price in 2024 ....? Obvs TBC
Lets take S&Ps $436 figure , adjust it for the gold price, and the NCM figures and come up with a valuation
First gold price... The long term AVERAGE INCREASE IN GOLD PRICE PER YEAR is around 11% (but we just had 2 flat/down years 2021 and 2022 prior to 23)
THUS - Average gold price 2024 should be at least $2260 (which is +10%) but TBF valid estimates could be speculate up to $2500 which is +21% (given the 2 flat/down years recently - in fact 5 of the past 10 years have been significant 'down (-27% in 2013) years where on average should be up 11-12%)
THUS - IMO the Average gold price in 2024 will now likely be between 21% and 38% higher than the 'average' quoted 2021 price of $1790 (as used by SP Global). This is supported by the anecdotal theory that the present gold market cycle bottomed in 2015/16 normally an 8-9 year cycle and normally (historically) last two years of bull markets are the largest movers.
Take the "average S&P data for gold sales was $436 per reserve oz" paid is actually slightly misleading - NOTE: This is the ‘average’ price paid.
So to illustrate - An obvious 'upside' example of a comparable transaction was Australian based Regis Resources: Regis paid 852$ US per Reserve oz for a 30% interest in the Australian Tropicana Gold Mine in June 2021:
https://www.afr.com/companies/mining/re ... 413-p57iwv
On an 100% basis Tropicana is a Tier 1 operating gold mine that produced over 420koz of gold in 2020. The Project currently has a seven-year reserve life with a 2,964koz Au Ore Reserve. NB - That Already sounds a lot like Havieron. Albeit, Hav will certainly have a greater mine life - simply becuase Tropicana had already produced for circa 15 years since 2006. In fact Shaun looked at it whilst at Northern Star and rejected it.
"Under the terms of the agreement, Regis will acquire the 30% stake from IGO for a total consideration of A$903M (US$688M) cash. Regis intends to fund the Transaction through a fully underwritten equity raising of A$650M, consisting of a A$450M entitlement offer for existing shareholders, and a further A$200M to be sourced from institutional investors; and a A$300M term loan facility which will be provided by Bank of America.
Completion of the Transaction is subject to AngloGold Ashanti Australia Limited (AngloGold) waiving its Right of Last Refusal (ROLR). The Transaction is expected to complete by June 2021 if the ROLR is not exercised during the 60 day lapse period.
Based on 30% of the Project’s Ore Reserve balance of 808koz Au (2,694koz on a 100% basis) and the consideration of ~US$688M, Regis is paying US$852/oz in Ore Reserve. This is a premium to Minesonline.com’s 1, 3 and 5 year normalised average Operation Reserve multiples of US$206/oz AuEq, US$268/oz AuEq and US$277/oz AuEq respectively."
So why are people are prepared to pay such BIG money for long life ounces in Australia....????
https://www.igo.com.au/site/pdf/785a0e2 ... sition.pdf
Following final deductions, Regis paid $889m AUS after closing the deal - slightly lower than the originally billed AUS $903m
Lets take an estimate purchase figure for Havieron/ GGP - a much lower numbers again, than Regis paid per oz, but somewhat higher than SP's seriously un-representative (presumably it included cheaper African assets for $100-200/oz in Hell holes like Mali or Sierra Leone - I can only assume) for the S&P quoted $436 ave figure.
$436 +30% increase (applying an historic average gold price increase from 2021) takes it to circa $570/reserve oz based on fundamentals. This is the minumum IMO based on the figs above and the Regis example who paid $850/ reserve oz in Oz in 2021 ) . Now let's NOT add a reasonable Regis/Tropicana Australian jurisdiction premium - for a very large production profile T1 asset in a safe place - nope - , let’s just go BASE CASE off the basic gold price increase since at 30% (ie 30% global inflation since 2021) of
GGP/NCM has already proven to date it can convert 86% of resource (TODAY) into reserves as per the NCM mine plan. Thus = 2.5 moz resources (latest MRE of 8.4moz x 0.3) = 2.16 moz reserve, Net to GGP, TODAY. That’s Not five years away , that’s today.
Thus my ggp Nav estimate is 2.16 moz x $570/oz = US$1.231bn (minus GGPS share - ie $150m Capex spend - a further 8% discount and then plus whatever else GGP finds at say EG or SWAG or Juri currently zero) = Nav of circa $1bn net to GGP
GGP is thus worth a minimum of $1bn to $1.2bn …
Adding on a suitable Regis type 'premium' could fetch upwards of US $1.4bn to $1.836bn
This is not 'pie in the sky' - this is what Regis did actually pay in 2021 - $850 per resource oz - for just 30% of Tropicana back in 2021 circa 3moz). And also consideration should be given to the fact Regis will have an extra $250m spent in milling plant equipment.
NOW - Imagine if gold goes to $2600 or $2800/oz next year or so.. - a highly possible outcome , given the current macro environment of increasing inflation, stagflation and negative real interest rates and potential challenging growth environment ?
It’s then blue sky, but the GGP Premium could be as shaun days said - totally eye-popping - at $2.5 to $3k gold. This is becuase there just are not enough new large gold assets being discovered. Ggp also has the benefit of 20-25% copper - highly desirable.
I quote from the same SP document (where we lifted the $436/oz average paid in 2021):
hTTps://www.spglobal.com/marketintellig ... solidation.
"The number of such new, high-quality discoveries will not be enough to support the long-term pipeline, however, with global gold production expected to stagnate in the near term and decline before the end of the decade. A thinning project pipeline and diminishing reserves will likely sustain the high valuation of operating companies and the high price paid per ounce of gold transacted.
Pretty clear that even S&P think the $436/oz will increase significantly also. Nice. I Look forward to their update 2023 document.
And this is without adding any ‘exploration upside’ to the project based on scale , bulk mining opportunities of the Eastern Breccia. And bulk caving of the Northern pod or northern Breccia which are both discrete and high grade large zones.
Consider an interview published last week with a professional gold investor and gold fund manager. https://www.youtube.com/watch?v=da7yIHzSuwA
His is an Interesting take on the sector this year where: "Gold was up becuase central banks are buying, but they don't buy silver or miners". He is Fascinating from 6 mins where he talks about take-overs: Majors have no choice but to replace reserves by hoovering up the juniors with big deposits becuase nothing large has bee discovered. The money needs to flow out of the money market funds and into miners, where the disconnect between the gold price fundamentals and the Miner will be closed.
Given these facts and the relatively low price of GGP presently...I personally expect a bid could easily land anytime. Maybe Newmont would be prudent to check what they’ve got and get it into production first? This outlook assumes no further 'market games' or 'technical delays' which are risks as we cannot know nor can we know the mind of Newmont.
2023 has been an interesting year for GGP shareholders - I think 2024 could be even more so. When presumably the ASX listing arrives.
Have a great new year all.
