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The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Friday, March 28, 2008

Out of San Gold, Into Gold-Ore

I sold all my San Gold Corp. shares this week. The reason for selling is that San Gold is far less undervalued compared to other junior gold miners just entering production—in particular Gold-Ore (GREXF) and Metanor Resources (MEAOF). This action demonstrates the importance of periodically assessing the relative valuation of different companies an investor holds or is interested in holding.

The following analysis is what drove my decision to sell San Gold. Note that Gold-Ore and Metanor have similar Target/Current Price Multiple valuations and San Gold’s multiple is much lower.

San Gold Corporation
2009 TARGET PRICE (10x Projected Cash Flow): $2.04
Target/Current Price Multiple: 1.4x

Gold-Ore Resources
2009 TARGET PRICE (10x Projected Cash Flow): $3.27
Target/Current Price Multiple: 4.3x

Metanor Resources
2009 TARGET PRICE (10x Projected Cash Flow): $4.12
Target/Current Price Multiple: 4.2x

I sold my Nevsun based on lack of movement forward on getting bought out and a sliver of my Jaguar Mining on Yamana’s announcement that they will be more internally focused on operations and less interested in acquisitions. It is hard to believe that Yamana’s Marrone (President) can resist Jaguar. Time will tell.

I added some Gold-Ore shares to my holdings this week. The plan is to add more Gold-Ore shares on price weakness and also bought a starter position in Kinbauri Gold Corp. (KINBF) at $0.92 a share. Kinbauri is projected to enter production in 2010 so this may be a little early. A lot can still go wrong as they move towards production. I bought KINBF because a quick and dirty calculation on resource base showed more than a $6.00 a share value. A more complete analysis will be forthcoming.

The following are the current junior gold miner holdings by weight in my portfolio.

Metanor Resources (27%)
Jaguar Mining Inc. (14%)
Gold-Ore Resources (6%)
European Minerals Inc. Warrants (3%)
Golden Queen Mining (2%)
Minefinders Corp. (2%)
Kinbauri Gold Corp. (2%)

Have a great weekend!

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