Gryphon Gold Corp. (OTCBB: GYPH), a precious metals exploration and development company located on a very promising property in Nevada, similar to companies such as Scorpio Gold (CVE: SGN) and New Gold Inc. (AMEX: NGD), appears undervalued after reviewing their updated NI 43-101.
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NI 43-101 Shows Significant Gold Resources
Gryphon Gold completed a NI 43-101 compliant pre-feasibility study in April of 2011 that showed very promising results. The report projected production of 368,800 ounces of gold mined, 238,504 ounces of gold recovered, and 40,00 ounces of annual gold sales. With a gold cash operating cost of just $476/oz. for the first 2 years, and an average cost of $822/oz. over the life of the mine, the project is expected to produce an internal rate of return in excess of 344%.
In an August 2011 investor presentation, the company used this data to show that it could generate total net revenues of $50.9 million with $1,500 per ounce gold prices. And with its net operating loss carryforwards (NOLs), this would translate to a significant net income in the near-term that would only increase if gold prices remain at current levels or move higher.
Gryphon Gold Trades at a 1x Forward Multiple
Gryphon Gold currently trades with a market capitalization of just $54.3 million, as of October 21, 2011. With estimated net revenues in excess of $50 million during the first year of production, this means that the stock could be substantially undervalued at these levels. In fact, the company’s forward price-earnings multiple – a commonly used valuation metric – is an ultralow 1x.
And contrary to what the current valuation suggests, these revenues and net income are not distant prospects. The company announced on October 17th that it has already begun shipping loaded carbon to Just Refiners Inc. of Reno, NV. The first production shipment was 4.05 wet tons of carbon loaded with gold and silver and should help the firm report its first revenues this quarter.
A Great Investment Opportunity
Gryphon Gold represents a great investment opportunity at its current levels. With revenues on the way this quarter and drilling already commenced, investors can expect to see results in quarters not years. And in an uncertain economy where consumer spending remains lackluster, the company’s primary product (gold) is one of the only true safe-havens.
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