Orsu Metals (TSX: OSU) (Formerly European Minerals)
Shares: 457M issued, 621M fully diluted. Recent price: C$0.67
Due to the completed merger with Lero Gold, the total gold resource of OSU (formerly EPM) has doubled to around 10M ounces. The company also has substantial copper resources spread across its three projects (two projects in Kazakhstan and one in Kyrgyzstan).
Half the resource is associated with the Varvarinskoye project, which is currently being ramped up and is expected to be producing gold at 80% of design capacity by year-end. It is expected that full production, comprising 140K ounces/year of gold and 25M pounds/year of copper, will be reached during the first quarter of 2009. If this occurs and costs are roughly as planned then Varvarinskoye will generate sufficient cash flow to justify around C$1.80/share for OSU. The company’s earlier-stage projects are probably worth around C$0.20/share at this time, but should increase in value as more work is done. This gives us a rough total valuation of C$2.00/share assuming that current production/cost plans are achieved.
As illustrated by the following chart, the stock market’s present valuation is a huge distance from the aforementioned figure. Technically, the stock is at long-term support defined by its 2006 low.
Performance is the key. If OSU’s new management can simply do what they say they are going to do then the stock market will be forced to price the stock at a much higher level.
