Extract from CGP MDA29 Nov 2022 07:29
Comparable Public Company Approach
The premise underlying comparable public company analysis is that the value of a mineral property can be estimated by analyzing the enterprise value of the public companies which operate similar companies or assets under similar circumstances. The value of the properties is assessed as a metric of enterprise value per copper equivalent pound, which is a risk adjusted metric of the reserves and resources contained within a given company’s mine site(s). When performing a comparable public company analysis, it is necessary to identify representative public companies. In determining the comparability of public companies, factors such as the primary ore, location, development stage, reserves and resources, grade, infrastructure and accessibility for the underlying commodity must be taken into consideration.
The valuation firm concluded that the most comparable public company was SolGold, which holds the
85% interest in the ENSA project (through its wholly owned subsidiary SolGold Finance AG). As a result, the market multiple of SolGold’s enterprise value per risk adjusted in situ copper pound identified drove the valuation range concluded in the report.
Historical transaction multiple approach.
The valuation firm performed market research to identify historical transactions where properties similar to Cascabel were acquired. The key considerations in identifying comparable properties were as follows:
- Exploration stage
- Primary metal is copper
- NI 43-101 resources technical report has been prepared prior to the transaction.
The valuation firm concluded that none of the companies or assets identified in the historical transaction search were as comparable to the ENSA investment, as that of SolGold identified in the comparable public company market approach.
Summary and conclusion:
The valuation of ENSA is based on the comparable public company multiple implied by the enterprise value of SolGold. The result was a value per risk adjusted in situ copper pound of $0.052. This value was then subject to a marketability discount of 5%. The model is most sensitive to the in-situ price of copper as determined through analysis of the market capitalization of SolGold.
At September 30, 2022, a 5% increase/decrease in the in-situ price per pound of Copper would result in an increase/decrease in the fair value estimate of ENSA of approximately $4.06 million keeping all other variables constant. Management continues to believe that the market approach is the most appropriate approach in consideration of various factors including the volatility in the in-situ value per pound of copper.
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