RE: Undeniably undervalued25 Aug 2020 12:24
The improving gold price and strong outlook has not been reflected in the share prices of smaller gold mining companies, as demonstrated by the VanEck Vectors Junior Gold Mine ("GDXJ") trading at only a quarter of its peak in 2011 when gold was trading at c.US$1,900/ounce. GDXJ is based on +US$100 million companies and the stock market for micro-caps like KEFI have generally performed much worse.
In both Ethiopia and Saudi Arabia, our project predecessors and partners have provided much of the project funding to date. And going forward, development funding will be largely at project levels, in TKGM or G&M as the case may be. Nevertheless, KEFI shareholders have suffered dilution as KEFI funded the exploration, acquisition and early progress and all of us long term shareholders certainly deserve to see reward for our patience and effort. KEFI pushes forward and it now seems to be the most supportive environment for our sector and our emerging region since our IPO.
The Directors are seeking to close the gap between the Company's market capitalisation and the significantly higher intrinsic valuations of the Company's projects. For example, KEFI's share of Tulu Kapi's NPV (see explanation in Finance Director's Report) at the current gold price of US$1,700/oz, equates to £153 million, according to the Company's financial model prepared by its project finance adviser, which is approximately nine times the Company's current market capitalisation of £18 million at the time of writing. This places no value on KEFI's beneficial interest Jibal Qutman Gold and Hawiah Copper-Gold in Saudi Arabia.
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