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March 30, 2009 Dear Friend, Earlier this month we called on an old friend, Randall Oliphant now outgoing CEO of Western Goldfields and a former Barrick Gold CEO, who sold the Mesquite gold mine in California to New Gold for an estimated $149 per oz. We wanted to try to understand the "going rate" for gold reserves in the stock market and transactions a little better, and wrote the enclosed report. Between 1985 and 1996 we represented eight different gold mining companies in 14 different M&A advisory assignments, such as Freeport-McMoRan Gold's $706 mm sale of 70% of the Jerritt Canyon mine in Nevada to Minorco, expert witness testimony to value the Hemlo gold mine assets in International Corona v. LAC Minerals and many other assignments. Enclosed you will find an updated treatise on current gold mine publicly traded valuations and recent merger transactions. Valuations vary widely due to combinations of economic uncertainties, political risks and mine-specific uncertainties. In fact, greater fundamental variations exist today than a generation ago. Gold prices vary widely outside the former $200 to $400 range. Crude oil, production cost currencies such as the A$ and C$ and other costs have varied widely over the past two years. Capital construction costs are uncertain. Further, six of the thirteen actual merger transactions we reviewed had no proven and probable reserves, which added a further level of fundamental uncertainty as buyers' seized opportunities without full information. We went into very great detail in evaluating every minor influence on the enterprise values per oz of Barrick, Newmont, AngloGold, Goldcorp and Agnico-Eagle. We also enclosed tomorrow's seminar agenda, our seminar address, a detailed update on ANTO and our weekly detailed 20+ page review of spot markets. Faithfully, John C. Tumazos |
Copyright © 2008 John Tumazos Very Independent Research,
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