Congratulations. A well thought out and articulate summation. I concur with most of your points in particular regarding the actual/realistic resource estimate. The 3.2 million ounces of gold equivalent constantly quoted assumes a cut off grade of 0.007 ounces per ton and comes from page 111 of the Technical Report dated January 2013 which assumed a $1,700 gold price (reasonable at that time but not now). Of the 3.2 million ounces, 2.5 million ounces is from Lucerne and 0.7 million ounces from Dayton.
IMHO this cut off was far to low even for that gold price (equates to revenue of around $8 per ton after met recoveries). Costs have been nearer $25/t (influenced significantly by the high fixed costs and higher than anticipated strip ratio). The cut-off at that time should have been at least 0.02 ounces per ton and with a reduction in the gold price and even higher decrease in the silver price, the appropriate cut off grade today would be around 0.03 ounces per ton.
The total resource for Lucerne using a 0.03 o/t cut off according to the official resource statement amounts to 1.2 million gold ounces (1.3 million gold equivalent gold ounces) - a reduction of some 1.2 million ounces before taking into account mine depletion.
Same applies for Dayton. At 0.03 o/t cut off the resource provides for some 0.25 million ounces gold (0.26 ounces gold equivalent).
Therefore the 3.2 million ounces AuE comes down to around The 1.6 million ounces (adjusting for mine depletion ) using a more realistic/appropriate 0.03 o/t cut off (which includes ~0.3 million inferred ounces). Whether any of these ounces will become economic is doubtful. If there is no reasonable expectation of their economic extraction in the future, there is a risk that the Resource Ounces are in fact zero.
The current SP provides a market cap of $63 million. Add the net debt of around $20 million (including the $10 million owing to Winfield following his royalty restructure which is not included as a liability in the balance sheets) provides an enterprise value of $83 million.
For 1.5 million ounce resource (yet to be proven economic), I would suggest a valuation of nearer $20 to 30 million.
Even if the property portfolio is worth $20 million (which effectively clears the debt and payables) that would provide a market cap of $20 to 30 million and a share price nearer 8 to 17 cents per share.
Side issue - Does anyone know why and how the Winfield debt can justifiably be excluded from the liabilities of the company? I find this highly questionable. From my reading of the deal it's debt whatever way it's looked at - even that part that can be satisfied via issuing shares.
