Valor Gold: Worth The Risk?

By: by Publicist Report

Valor Gold is a pure exploration play, and represents a risky investment. But how risky is it? The company is led by Arthur Leger, a veteran of the gold mining industry. The company is in an exceptional position in Nevada, and has a very good team in place full of high quality people who come from leadership positions in mining giants such as Freeport-McMoRan (FCX) and Newmont Mining (NEM). Both of these companies have a long history of good decisions in locating proven reserves of minerals in the ground. Having advisors who were in leadership roles of these companies speaks volumes about the seriousness of Valor Gold’s undertaking.

Valor Gold’s assets, its exploration claims, are located in the Battle Mountain – Eureka Gold Trend. This area has proven gold reserves of over 20 million ounces, one of the most productive gold belts in Nevada. CEO Arthur Leger believes this area contains world-class gold deposits. Mr. Leger’s pronouncements should be listened to closely given that he has been part of geological teams responsible for discovering over 10 million ounces of gold.

The area in Nevada that Valor Gold is exploring is close to several other mining companies. Newmont Mining, one of the largest miners in the country, owns multiple mines within 20 miles of Valor Gold’s holdings. Barrick Gold (ABX) one of the top gold producers in the United States, also has several mines located close to Valor Gold’s holdings. Not too long ago Barrick was largely an exploration-only company similar to Valor Gold, but its huge find of gold at the Cortez Hills mine instantly made it a large and rich company. This speaks well to Valor Gold’s assets. Paramount Gold and Silver (PZG) also has holdings in Battle Mountain, as does Premier Gold Mines (PG). Paramount is an exploratory company that has had very good success recently in finding gold producing areas, like San Miguel and the Sleeper Gold Project. Premier has seen several of its exploratory discoveries result in partnerships with miners, most recently a deal with Goldcorp. The Battle Mountain area is already one of the most prolific gold belts in the country. CEO Leger believes it has not been fully explored. With his track record I believe this claim is true. Given this, then you are looking at a site with perhaps as much as 3500 tons of gold. With all these companies clustered around the same area there is good reason to believe Valor Gold is sitting a substantially large amount of gold. With all these companies located so closely together mining for gold belies the fact that Valor Gold has found a nice sport for its only assets. This is one fact that makes Valor Gold look far less risky than it does on its face.

Making the stock look less risky still is the fact that it has attracted the backing of some major investors including the billionaire investor Dr. Phillip Frost, who is now one of Valor Gold’s largest investors. The company is also 40% owned by Pershing Gold (PGLC). Having this type of backing makes me less concerned about the company’s risk. This is evidence indicating a strong belief in the claims of CEO Leger that there are substantial deposits of gold on Valor Gold’s assets.

I believe Valor Gold is sitting on a substantial amount of gold in its Nevada holdings. Given this belief, it is still important to consider whether Valor Gold is worth investing in. Valor Gold is a small company. Its competitors have more financial resources and greater technical abilities. In order to mine the gold it is sitting on the company will more than likely have to partner with someone else who has the financial and technical know-how to get the gold out of the ground. This is where I think Valor Gold is an incredibly good find for investors. The company does not have the financial resources to pay a company to drill its assets. A company must be willing to come in and receives a share of equity in Valor Gold and then begin to produce on the site. If Mr. Leger is right, and the companies invested heavily in the area are right, then there is substantial gold where Valor Gold is located, and a company will come in to produce this gold or the company will be bought out.

Looking at the surrounding mines will give us some idea as to how much gold Valor Gold is sitting on. Newmont’s McCoy Cove Mine, a 6 million ounce gold mine, is 6 miles from Valor Gold’s operations. 15 miles from Valor Gold’s operations sits Newmont’s Pipeline Mine, where 10 million ounces of gold have been produced. 18 miles from Valor Gold operations, we also find Barrick Gold’s Phoenix Mine, with 8 million ounces of gold. 20 miles away from Valor Gold’s operations is Barrick’s Cortez Hills Mine, with 15 million ounces of gold. Being somewhat conservative, let’s assume the company is sitting on 8 million ounces of gold. Barrick Gold is producing gold at a cost of $460 an ounce. Gold is currently priced at a little over $1,700 an ounce. Assuming costs of $500 per ounce, the math is fairly simple. 8 million times $1700 equals $13.6 billion. Companies will not pay half the value of gold in the ground, but they will pay one third, which equals roughly $4.5 billion. Valor Gold currently has less than 67 million shares outstanding. $4.5 billion divided by 67 million equals a share price of almost $67 per share. This is an incredible return on a stock that is now trading at under $1. Even assuming that Valor Gold is sitting on just 4 million ounces of mineable gold – which would be the lowest amount in the area, the value would still come out to over $37 per share.

If you already own Valor Gold I would advise holding onto the stock until more drilling announcements are made. If you do not own the stock, I advise buying into it at the current price and waiting to decide if you want to buy more. While there is the risk that gold may not be produced at the site, the potential reward if it is produced is huge.

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