We spend a fair amount of our time scouring the mining and exploration sector to find golden nuggets or, more to the point, mining and exploration companies that have real potential value that is not yet fully articulated in a company's market capitalisation. There are quite a few around, but it's fair to say that some stand out more than others...
So this mornings news from Shanta Gold (AIM:SHG) reminded us of another potential nugget in the rough and we thought we should make a few preliminary comments. We hope to find time to look more closely at Shanta Gold in the near future and bring you a full Value Proposition for the company.
Shanta currently sits with a JORC defined Gold resource of some 2.6million ounces. Within this 1,504,205 ounces are inferred, 633,693 ounces are indicated and 480,546 are measured (figures taken from the Shanta website click here for a direct link
Now at this very early stage we have two specific points to make and these are, we think, worthy of further consideration:
1. The resource covers three project areas and appears to be substantial and by all accounts capable of further material increase going forward. In particular the measured resource of 480,546 ounces interests us. We often draw on the Edison Gold sector report, which suggested that, on average, measured resources should make up a value of $381 per ounce in the market capitalisations of Explorers. If Shanta were to be valued on the basis of $381 per measured ounce would equate to a capitalisation of $183million or £113million (that is £1.08 per share). We know that is a simplistic calculation of course and further analysis of resource geology, cut off grades, mining potential etc, are all required;
2. The company has, during 2009, stated an intention to develop mining operations within their exploration areas. In particular, in their 2.11.09 news release they note that a Mining Licence application has been submitted to the Zambian authorities in respect of the Chunya project. This announcement also notes an initial capital cost of just $5million for a gravity and carbon in leach ore treatment plant.
It's worth mentioning that Shanta Gold reached the heady heights of seventy pence plus per share in mid 2006. Could it return to that level again? Perhaps. The measured resource theory above suggests this could be feasible. And the added bonus of potential near term producer status will be a major attraction for investors.
As a result we need to look a bit deeper and we suggest perhaps readers also research this stock sooner rather than later.
Filed Under: Gold,
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