Banro (BAA): A golden stock

Posted Jan 27th 2009 1:15PM by Todd Harrison
Filed under: Newmont Mining (NEM), Commodities

This post was written by Minyanville contributor Lance Lewis.

Banro (NYSE: BAA) jumped 13% yesterday after the company announced that it had finally completed its bankable feasibility study on its Twangiza project and proved up nearly 4 mln ounces of its 10 mln ounce resource. Thus, we can now calculate an NAV for BAA.

BAA has no debt. So, assuming $1,000 gold, 3.67 mln ounces of Proven & Probable reserves, an average cash cost of $429 per ounce over the life of the mine (which is based on the feasibility study), and the estimated $410 mln required for cap ex, we get an NAV of almost $15 a share (which gives zero value to the company's current cash balance of around $20 mln and its remaining 5.6 mln ounce resource at Twangiza, not to mention the resource estimates at its other properties).

There are very few 10 mln ounce resources out there these days that are not already in the production phase. Newmont Mining (NYSE: NEM) paid $135 per resource ounce for a very similar 10 mln ounce resource just two years ago when the price of gold was lower. The same price for BAA would equate to nearly $34 a share. I seriously doubt BAA will be its current $1.35 a share for very long in the wake of this feasibility study and its resulting proven & probable reserves. And yes, I own the stock.

Tags: baa, banro, commodities, gold, lance lewis, LanceLewis, metals, mining, minyanville, nem, newmont, newmont mining, NewmontMining, todd harrison, ToddHarrison