Anglogold Ashanti (AU) is a global based gold producer, developer and explorer with mining operations in countries and HQ’d in South Africa with about 75.6 million ounces in proven and probable gold resources plus almost 47 million ounces of silver resources. Pretivm Resources (PVG), with proven management is a Canadian exploration and gold & silver mining company with over 30 million ounces of gold plus 100 million ounces of silver in measured and indicated gold resources located in secure British Columbia. AU has over $3.8 billion of long-term debt and deferred income taxes. PVG has no debt or deferred liabilities. AU has $183 million of goodwill to be amortized in the future. PVG has no goodwill to be amortized. In previous years, AU wrote off about $5 billion of derivative hedges in prior years. PVG has no such hedges. AU has a cash cost to produce gold of $866 per ounce. AU has an “all-in” cost per ounce of gold of $1,016. I estimate that PVG will have a cash cost of gold of $52.62. PVG will have an “all-in” cost per ounce of about $407.
I expect PVG to go into limited production (at 2,700 tons per day) within 2 years and full production within 5 years (in my opinion). AU sells for approximately $30 per share on the NYSE. PVG sells for around $13 per share on the NYSE. Recent drilling results for PVG have shown as much as 45,000 grams of high-grade gold per ton in the Valley of the Kings zone and is continuing to add significant reserves each quarter. This is one of the highest grades of gold ever drilled world-wide in recent memory. AU is continuing to use up its reserves, but has been able to replace or add to its reserves by marking up its reserves at higher projected prices, development and acquisitions. In our opinion, Pretivm’s consolidated resources will show better than 40 million ounces of gold and 200 million ounces of silver when released in the second quarter of 2013. Visit our website for continued PVG updates at http://www.SheldonsFinestCoins.com
AU pays 22c in dividends per share. PVG does not pay dividends yet since they are not yet in production. AU annual EPS is about $3.33 for 2012. PVG has no earnings yet. Based upon my latest calculations PVG could earn in excess of $18 per share once in full production within 5 years. AU has a current PE ratio of (9); if you have confidence in its earnings. I estimate that PVG’s price potential could reach $444; if not diluted by additional share issuances. I believe that PVG is dramatically undervalued with the potential to rise in price by a factor of almost 34 times its current selling price.
The time for PVG’s rise could be very close. I expect the shares of PVG to rise after this short induced sell-off has run its course or when updated resources are released in early 2013. AU appears to be fully priced at current gold prices and will go up $ for $ with gold prices. PVG can go up 34 times in price from here and then go up $ for $ with gold prices. A spread might make sense; long PVG and short AU or own PVG outright.
All the best, with a little glitter and shine in your lives!
Ed Sheldon CPA (retired) http://www.SheldonsFinestCoins.com