Before Liberty Silver was halted it was trading healthy volumes on both the TSX and OTCBB exchanges and at US$1.55 sported a remarkable valuation of $125 million for having only 1 early-stage project under joint venture and $1.7 million cash. That’s before considering the roughly 17 million in-the-money warrants and options outstanding, but nevermind.
Let’s take a trip along valuation lane:
(1) On March 29, 2010, Liberty entered into a joint venture with Renaissance Gold (formerly AuEX Ventures) on the Trinity Silver property located in Nevada. Liberty can earn a 70% interest in consideration for (1) $25,000 signing payment, (2) $5 million in exploration and development expenses during a 6 year period ending March 2016 and (3) completion of a bankable feasibility study by March 2017.
(2) The Trinity Silver project is Liberty’s ONLY project and the earn in is nowhere near complete.
(3) Renaissance Gold, a legitimate and respected exploration company, is trading at a $25 million valuation with about $7 million cash (that’s $100+ million less than Liberty) despite the Trinity property being just 1 of 13 projects under joint venture not to mention something like 20 other projects available for joint venture.
Given all that, sub-$10 million valuation makes plenty more sense for Liberty Silver. But the so-called* “renowned and respected investment advisor and founder of Midas Letter” James West (among others) would have you believe otherwise when as recently as September 28, 2012 he wrote:
The math is very straightforward with Liberty Silver’s Trinity Project: 50 million ounces of silver at $30 per ounce minus cash costs of $15 per ounce equals US$750 million divided by 80 million shares outstanding equals $9.38 a share. Chop that in half for the sake of conservativeness, and you still get a price of $4.68 per common share outstanding. If they don’t drill another hole.
Now this is obviously simplistic, non-43 101 compliant math,and in no way should this be relied to come to an investment decision. But judging by trading in the company’s shares, there is a lot of this kind of back-of-the-napkin calculation going on, and investors are apparently arriving at a similar conclusion. A major Wall Street firm is actively accumulating a position after visiting the property earlier this month.Normally I don’t try to chase a stock that gets up a head of steam like this, but after a second, more in-depth look at the company and its project, I decided to jump in.
But more importantly is the fact that legendary entrepreneur Bobby Genovese, Chairman of BG Capital Group, has become one of the biggest, if not the biggest shareholder of Liberty Silver Corp. I was able to reach Bobby in the Bahamas this morning, where he confirmed rumours that his involvement are indeed factual.
“BG Capital Group is betting big on silver, and Liberty Silver Corp is our biggest bet,” said the charismatic Genovese. “We see a rapid and straightforward path to production, and with SRK Consulting as our technical advisors, we demonstrate our commitment to using only top-tier talent to achieve our aggressive timelines.”
BG Capital Group is a Barbados-based private investment firm with offices throughout North America and with assets totalling well over $200 million and projected revenues of just over $240 million per year from interests across resources, real estate and financial services.
I hope it’s obvious that there’s absolutely no “conservativeness” going on in the above valuation approach used by Mr. West. This has already been pointed out at My Own Market Narrative.
*In a press release paid for by BG Capital. 8 months ago