Good points gents. Indeed the two cost numbers per ounce of gold are separable Here is a good website that expresses the Net Present Value idea behind it:

http://www.avoidglasses.com/rau-chart-and-analysis/valuing-a-mining-company-using-net-present-value/

So there are:

a) a certain capital cost per ounce, to get the mine going and dug down to the first real paying ore, and

b) a production cost per ounce, $500 in the case of PDG as given to us, although truly that number is an output of a PEA / FS and not known exactly yet, and

c) on top of capital cost per ounce, and production cost per ounce, there is the discount rate (a dollar 5 years from now isn't worth the same as a dollar today), a risk rate, royalties permits and ongoing fees including cost of capital, and taxes.

So the PEA will delinate whether all those costs, per ounce, remain lower than the cost of an ounce of gold.

The capital cost you can base on your ounces. So e.g. if your total capital cost is just over $400 million, then the capital cost per ounce is about $150/ounce, on e.g. 2.75 m ounces.

At $1450 gold, an indication of profit is probably a slam dunk, but PEAs never use today's spot price, because it changes so much. More likely a price of e.g. $900/oz gold, at the very most.

After that, you have to figure the rate of return, how long it takes to get a return, and years of mine life. Let's say you put in $400m to build a mine, and net profits earn you $600m back. That's a 50% gain, but over what time period, and could you do better with another investment.

There are of course other factors such as overall risk - e.g. financial or permitting for a heap leach, and whether you could leverage to the upside other company resources with further exploration.

I am pulling all of those figures somewhat out of the air - real figures will be in the PEA and PFS / FS.

The same site I quoted, going one level up, has a nice description of the alternate calculation, Enterprise Value per ounce. In the case of PDG at 35 cents/share, if we guess 2.75 million ounces, and just less than $10m cash, EVO is about $20-$25/ounce, which is right at the benchmark "advanced exploration" stage typical-price-mark of $25/oz, whereas a small producer is often valued at $225/oz, but after a LOT more dilution or the equivalent to get the capital to get the mine going. So on the face of that, PDG might be just fairly valued.

Of course, all that should be adjusted for: mining in Canada as a positive, vs. difficult heap leach permit, a positive on infrastructure, a ? positive on other properties, maybe a negative on the deep steep hole to be made, possibly a neutral on the average grade, a positive on the new VP Exploration (a good guy), a positive on news and momentum, etc. etc. to your heart's content.

By the way, here's that mine life graph inline. We are in the long valley of 4,5,6: