Some thoughts and a good read.
I'll share some thoughts, then paste a post which I think is excellent because it focuses on what has been, and will always be most important, valuation.
In reviewing the 10Q, I think like many I was looking for as many clues about the valuation of CMKX as I was looking for the goods on USCA. I plead guilty.
There was much that didn't surprise me, and a couple of items that did. I'll focus first on what didn't surprise me.
Let's address a fundemental point of USCA we must acknowledge. Exploration companies like USCA who are just in the beginning stages of operation will not report revenue or profit like 'product based' companies that market their goods on store shelves or the internet. It is through current and future efforts which will hopefully produce value and revenue stream in future 10Q's and 10K's. It was no suprise in their reporting a lack of revenue.
The reported numbers for USCA's interest in different mines or percentage of another companies mineral claims were the COSTS of such endeavours, not the potential value, nor numbers reflecting any potential revenue stream. Again this is not a surprise and should be interpreted as THE MOST conservative value (based on cost rather than value). Note, it was AFTER September 30, 2004 that press releases described USCA's interest in uranium mines in the northern region, and their ineterest in the Ecuador gold mine. If the pr's released in October (post 9-30) are correct, an income stream should be realized from both of these efforts.
One of the points that surprised me (pleasantly) was that USCA actually took on debt in the form of 2 notes payable, versus equity dilution as is seen so often. I would rather see a company grow by using a reasonable percentage of low interest debt than to dilute the market with more shares.
The other point which surprised me was the mention of the 3:1 stock split distribution that occurring in October (post 9-30), and the SEC inquiry (again post 9-30). Being cognizant of the SEC inquiry AND ACTUALLY MENTIONING IT within the 10Q tells me this report may also serve as part of their compliance with the SEC, and to hopefully finalize all issues there.
With regard to our curiousity to find the golden key to CMKX's valuation within USCA's report, only some glimpses are given and others have brought those numbers up. Those glimpses, based most on costs not value, still look quite good. Any positive finds in FALC will grow our VALUATION exponentially! What follows is a post offered which speaks very well to this great potential.
Be well, Bo : )
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dapilot
Diamond Hunter
member is online
Posts: 48
Good Read, About Valuation!!
« Thread started on: Today at 11:47am »
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Valuation of Saskatchewan Kimberlite Rights
Note the follow passage in the latest filing by USCA:
On January 20, 2004, the Company entered into a joint venture agreement with Nevada Minerals, Inc. to develop up to 500,000 acres of potential Kimberlite mineral property located in Canada. The Company issued 5,000,000 restricted shares of its common stock to acquire the underlying
rights to Kimberlite property. Under the joint venture agreement the Company shall be entitled to receive 20% of the revenue generated from the property. The value of this transaction approximates $5,175,000 based upon the fair value of the said shares on the consummation of such agreement. Additional costs paid by the Company totaling $300,000 for the exploration of the property have also been capitalized as costs of maintaining mineral rights.
So, USCA was willing to pay a most surely discounted price of $10.35 per acre for a 20% revenue share of Canadian kimberlite mineral rights. I would say that could mean that a discounted value for a 100% revenue share is therefore "worth" $51.75 per acre of Canadian kimberlite mineral rights.
According to my estimates by looking at the only maps that I know of, in both the FALC and Green Lake areas of Saskatchwan, CMKX and CMKX-JV Partner's mineral rights amount to about 1.25 million acres. (about 1 million acres in the FALC area, and about 250K acres in the Green Lake Area). Assuming all of that land possesses kimberlite of some value, then a discounted value based on the above transaction might be calculated to be $64.7 million, for a 100% revenue share of undeveloped, non-"assessed" = not "graded" mineral rights. We all know that diamond plays that are successful exhibit an increase in value along a "valuation channel" as exploration stages proceed into production. For example, the Ekati diamond mine play went from a $19million valuation in the grassroots exploration stage to a $2+billion valuation as they entered into production, and then BHP bought them (Diamet) out. A 110 fold increase in value, approximately. (see www. kaiserbottomfish. com, the Rational Speculation Model) So, $64.7 million (deeply discounted as reflected in a non-hostile transaction) x 110 fold increase is about $7.1 billion, just as an example. And with so much land area, who knows whether or not there are several dozen Ekati-scale and scoped kimberlite bodies waiting beneath only about 300ft or so of glacial till?
And we haven't even factored in the Athabasca basin uranium rights recently transacted through United Carina, or the Juina Mining assets, or the zinc + other metal assets to be evaluated in the Casavant International Mining holdings, or the future developments in acquistions that St. George Metals might represent, waiting in the wings.
More surprising developments are likely in store.
Good Will to those of Good Will.
Wellmetfellow
AI
