Detour Gold is totally Canadian, somewhere in Northern Ontario near Timmins. It promises to become one of the largest gold mines in the country having only recently started actual production. It’s cash costs run about $749 per ounce and things are going more or less according to plan. No unexpected expropriation, no murderous rebels in the country side and no political or environmental issues that cannot be resolved sensible. We like the absolute perfect symmetry in the drop from $40 to $7 (Eldorado is close but not that perfect). No lets suppose the investment can be amortized at about $150 per ounce over the 21 year expected life of the mine. The all in costs would then be roughly $900. Should gold drop below that the mine is worth nothing. At $1900 an ounce, about the all time high, the stock was priced at $40 and supposing that the stock was correctly priced at the time , it follows that the stock loses $40 over $1000 per ounce of gold, or $4 per $100. At $1300, the present price of gold the stock should then be worth $1900-$1300=600, 6x$4 =24 which then gives a present stock price of $40-$24=$16. At $9/10 today the stock is undervalued by $6. It is hard to rhyme this with the ubiquitous a-b-c pattern displayed on so many gold stocks but then in EW it is not always true that if it is yellow, quacks and floats on water that it is a duck. The chart below gives a possible alternative at least for this stock;
A whole slew of variations to this pattern are possible, certainly below $8.24 this starts looking fairly attractive. Here are some facts on this company from its website;
