Sunday , 2 October 2022

Here’s How to Value a Junior Miner’s Gold in the Ground (31K Views)

At any given time, we know the international spot price for an ounce of refined gold but what about the gold an exploration or mining company has in the ground – how do we value that? [We have the answer. Read on.]

The comments above & below are edited ([ ]) and abridged (…) excerpts from the original article by Louis James and Andrey Dashkov (

There are several different ways to value a junior miner’s gold in the ground:@Investment Insights

1. Given sufficient data, you can estimate a reasonable net present value (NPV) for a project and deduce what each of the company’s ounces should be worth. To do this, you need to know annual output of the proposed mine, proposed capital expenditures, energy and other costs, and many more things. Unfortunately, for most deposits held by the junior companies we tend to follow, there is just not enough data available.

2. Another approach is to compare the value the market is giving a company per ounce of gold in hand against the average value the market gives companies with similar ounces. The most obvious way to define “similar” ounces in the ground is to use the three resource and two mining reserve categories defined by Canada’s National Instrument NI43-101 regulations – the industry standard. These are combine these into three broad groups:

The lowest-confidence category, based on just enough drilling to outline the mineralization.

b) Measured & Indicated (M&I):
These higher-confidence categories have been drilled enough to establish their geometry and continuity reasonably well.

c) Proven & Probable (P&P):
These are bankable mining reserves – basically Measure and Indicated resources with established value.

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So, what does the market give a company, on average, for an Inferred ounce of gold? M&I? P&P? To answer this, we combed through every company listed on the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSX-V) and pulled out the ones with 43-101-compliant gold resource estimates (or mostly gold) – no silver, copper, etc. Of these, we kept only those with resources that fall almost entirely into only one of our three broad groups: Inferred, M&I, and P&P leaving us with about 90 companies to calculate some averages on and we got these numbers:

• US$20 per ounce Inferred
• US$30 per ounce for M&I
• US$160 per ounce for P&P

Armed with this information, if you didn’t know anything else about an M&I resource (political risk, type of ore, etc.), but you saw that the company that owned it was trading at $10 per ounce, whereas its peers are valued at around $30 an ounce, you can conclude that there must either be something very wrong with the project or the stock is a great speculation. If there’s nothing wrong with the project, there’s an implied growth potential in the stock price, based on the difference between what the company is getting per ounce and the market average for similar ounces. In this case, it would be: $20 x # Ounces ÷ # shares.

As a matter of perspective, a few years ago the market was giving a company about $25 per ounce Inferred, $50 for M&I, and about $100 for P&P. Then, when gold ran up over $1,000 before the crash of 2008, these valuations went out the window, and some companies were getting over $100 for merely Inferred ounces – do we have your attention now? Conversely, just after the crash, there were companies having a hard time getting $10 for M&I. That was clearly a sign that it was time to buy, and we did, with gusto. It’s also why, when the Mania phase gets underway, we’ll be selling into it as gold approaches the top; we will not be attempting to time the top. It’s far better in this business to be a day early than a day late.

Today, the market is willing to pay more for advanced and producing stories ($160 P&P) but is discounting earlier-stage stories, hence the lower M&I valuation than in previous years ($30). These figures will change again as the market’s appetite for risk changes.

Bottom line
We often get asked what an Inferred, or M&I, or P&P ounce is worth in the ground. The $20, $30, and $160 figures are only rough guides, and you must consider the reasons why some ounces are given more or less by the market, but they’re a good starting point.


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  1. I wrote two articles decades ago titled “All GOLD in the Ground is Not Created Equal”.
    The data used to illustrate the critical factors is so long gone as to be irrelevant to today’s reality.
    I am not a degreed mining engineer but was trained by a couple of the best to do ore reserve audits on deposits with enough drilling to have block models, so thus able to do economic evaluations of Capital and operating costs. and economic evaluations.

    A google search led me to this article as I am working on a deposit which this great review is helpful.

    Further to the discussion the two initial major issues are is the deposit open pit or underground.
    Grade is the MOST important factor for either. Then the geometry of the geologic container is next, for both style of deposits. Underground is width, and an open pit is the initial and then ultimate waste ore ratio.
    These factors are the primary influence of Capital costs and Operating costs.
    Next is the metallurgical recovery, easy or difficult?
    Placer deposits are easy as recovery of free coarse gold has been done forever, but today the low grade and refractory, sulfide encapsulated gold can be tough. Carlin trend here in Nevada operated by Barrick and Newmont has autoclaves to roast the ore which is huge capital and operating costs, and environmental problems.

    NEVER ever dismiss the political risk of the location as permitting is a major issue. Couple of huge environmental sensitive projects in Alaska may never be permitted, and have hundreds of millions of sunk costs for exploration and fighting the environmental issues.
    I worked on a project in B.C. Canada where we dropped about $20 Million and walked away. Good grade open pit, but permitting was / is hopeless. $3 Million ounces X $1700 =$5,100,000,000. Governments take off that is for sure huge for tax revenue, jobs, ect, is something they care not about.

  2. Great little read. It is indeed difficult to find smaller mines with NI 43-101 technical reports. You found 90 of them for this report, I’d love to see that list if you are ok in sharing
    Thank you.

  3. Analysts from Steifel Nicholas are doing valuations at $79US/oz for Inferred ounces. That’s at $1700+/oz. I would expect more at today’s nearly $1900/oz., if it holds. I wouldn’t be surprised to soon see deals for over $100/oz/

    Obviously ease of extraction makes a difference. High grade open pit would probably attract significantly more than lower grade deep underground.

  4. Nice article 🙂 If you want to know more about gold then check this out →

  5. Hi
    Thanks very interesting.
    According to the chairman of Hambledon Mining in the UK, under the ground gold is currently being prices at $150-$250 per ounce. Have you done the math for silver miners though please, or have a ratio to gold for this equation?

    thank you