Yesterday it was announced (click here) that Iamgold (IMG.TO) is buying Orezone (OZN.TO) in an all stock deal worth about $139 million.
Orezone is an gold exploration company in western Africa (Burkina Faso) with low-grade, gold-oxide (heap leachable) open pit projects. The takeover was probably based almost entirely based on Essakane, Orezone's flagship property.
The key facts about Essakane are:
- 3.1 million oz Reserves at 1.67 g/tonne.
- 2.1 million oz Measured, Indicated and Inferred oz at 1.35 g/tonne. Having discussed this with Orezone investor relations its clear that these 2.1 million oz are on top of the Reserves oz. $358 estimated cash cost per oz @ $85 / bbl crude oil.
For valuation purposes we get roughly $45 / Reserve oz or $26 / Reserved + MI&I oz. This can be used in a crude way to evaluate other exploration companies. I expect I'll use it to value New Guinea Gold (NGG.V) this weekend.
I am not an expert at this kind of valuation. Please feel free to leave comments about what makes one reserve oz more valuable than another. It seems to me that political risk, the available infrastructure and the required capital needed to bring the oz into production are also key factors.
Also, please leave me some comments about other explorers you think are ripe for a takeover and how they compare to Orezone.