In my view VSA Capital did not state any inaccuracies in their Research Report. Second, this was a Research Report, not a NI-compliant Resource Estimate, why is the Exchange up in arms? The NR for the Resource Estimate clearly showed varying degrees of resource in a chart dependant on cut-off grade used. EAG highlighted the 699K High grade ounces at 3.0 g/t cut-off while VSA highlighted 998K ounces at the lower cut-off at 1.4 g/t at an avg grade 4.2 g/t.
Of note is VSA’s Valuation Call on EAG,…
VSA Capital Valuation for EAG, (prices as at 1 November 2011)
Peer Group average enterprise value per ounce is C$37.9 per ounce.
This number is lower than that which analysts would normally attribute to companies such as these. Instead, in our opinion, this average reflects
current market conditions, which for many months now have shown depressed values for gold stocks (especially exploration plays), despite the high gold price. Nonetheless, at C$18.7 per ounce, Eagle Hill is still clearly undervalued relative to its peers. (A fair valuation in a good market would be C$100 to C$120 per Gold Once, especially at POG C$1600)
If that average number (Peer Group) is applied to Eagle Hill, it should have a market capitalization of C$38.8 million and a share price of C$0.35. However that is assuming that Eagle Hill owns 100 percent of the Property. At its current 75 percent ownership (again assuming that it makes the remaining payment of C$400,000) the Company should have a market capitalization of C$29.1 million and a share price of C$0.26. While this is much lower than the C$0.53 to C$0.72 share price we previously stated was our target price, this reflects market conditions.
MCap for EAG today, 27 Dec 2011, is $15.64M at C$0.14 a share. Selling Pressure should end, as last day for Tax Loss season was 23 Dec 2011, Market Conditions for all Juniors and EAG should improve. Will we see the “Peer Group” avg $0.35 EAG or reflect the “Better Market Conditions” C$0.53 to C$0.72 EAG and reflecting POG $1600 not $400?
IMO, Valuation can only go higher, cheers, Mark
