February 7, 2015
I often get asked by potential investors and shareholders; “Abraham, what happens if you’re right and there are multiple high-grade ore shoots on this property and we actually hit another one? What will be the impact on my investment?
Without getting into the most obvious risks like, maybe we’re just plain wrong and despite the high grades we’re encountering in our exploration program, the next ore shoot, IF it exists, may be too far away to access from current workings, too small, lower grade, too deep, etc., etc. I’ll have our project geologist comment on some of these issues in upcoming press releases and reports as we complete the current drilling program. But, for purposes of addressing the opening question, my response goes like this:
Let’s say we encounter another ore shoot like the first one that produced 133,000 ounces at an average ore grade of 16.01 oz. of gold per ton. (More than a few geologists believe that in gold deposits like this one, it is more likely than not, several ore shoots exist). Let’s further speculate, that the grade is only one-half that good, and production costs have more than doubled. Let’s also assume that the gold price remains constant at $1,200 until we extract the entire ore body. Under these circumstances, arguably, LKA could earn, after taxes, depreciation, depletion allowance, the usual stuff, about $.40 per share. IF, the market would value us at at least 10x earnings, LKA’s market cap would be somewhere north of $75 million…around $4.00 per share. We closed yesterday at $.54 per share with a total market cap of $10.3 million. My point is, you can slice and dice these numbers anyway you want and still come to the conclusion that LKA may be significantly undervalued.
Since I rolled out the negative possibilities in the second paragraph, its reasonable to ask ourselves, WHAT IF some positive things occur, like, multiple/bigger ore shoot discoveries? Higher ore grades? What about monetary inflation, or currency collapses, or global gold supply concerns? Any one of these events, or combination of events, could be a catalyst for higher LKA share prices….IF WE “HIT IT.”
As always, you’re welcome to contact me directly with any questions or comments: firstname.lastname@example.org
Mr. Abraham’s comments contain no material non-public information. This message is intended to provide investors and shareholders with management’s views and opinions of current operations, objectives, and industry conditions and may contain certain forward-looking statements. For more complete assessment of project and investor risk readers are encouraged to read the Company’s most recent public filings with the Securities & Exchange Commission. Mr. Abraham’s statements, projections, and opinions expressed in this message are made pursuant to the “safe harbor'” provisions of the Private Securities Litigation Reform Act of 1995 and the Bespeaks Caution Doctrine.