Scorpio Gold Corp. (SRCRF)

[Belgie24]

Here's an article some might find valuable, in defining different producer levels as in majors, mid tiers, juniors. It was written in 2009, but seems very relevant.

http://www.gold-eagle.com/gold_digest_08/wright050109.html

According to the author, for Scorpio Gold to be a mid tier, they'll need to produce over 200,000 oz of gold per year, quite a leap from this year's 35,000 estimate. The following valuation measure was very interesting to me:

"By dividing market cap by annual production volume you get a value in dollars of market-cap-per-ounce-produced. Both the mid-tiers and seniors have very similar values, at around $4400 of market cap for every ounce produced. But the average junior was less than half this amount, at $2100."

If you take that $2100 average and multiply by SGN's 35,000 oz prediciton, you'll come extremely close to their current market cap in the $73 million range. Also relates to SGN's market cap over $100 million when they were predicted to produce 50-60,000 oz this year. Seems like a pretty good measure to follow.

The other thing is when and if they do become mid tier (ie less risky), the market will reward them with a multiplier of $4400 times oz, instead of 2100, so that would mean quite a market cap jump, the multplier more than double. 4400 times 200,000 is $880 million market cap. Even if SGN had double the amount of shares outstanding, the share price would be nice!