I use a hybrid of NPV and ROV for the option agreement. ROV is the only fair way to determine its value. After talking to Jason a little while back I decided it was time to redo the numbers. Oddly enough, the NPV dipped only slightly but the OA value went up a fair bit. When I use gold metrics to find real dollar value and project that forward taking into account 60% of a QE effect the value rises dramatically. From our perspective we are entitled to the forward earnings 10 years out to the LOM (Life of Mine) but I cap that at 22 years. Beyond that it's fair for Teck to apply a risk factor that rapidly reduces that value.

After doing more research on the depth/slope limitations I concluded that we drilled just deep enough to validate the depth issue and can safely say that it's fair to add 2.4% to the known reserves. Using extropolation and the same statistical appraoch that has bourne much fruit, we can say that the discovery zone is mineralized and has potential. However, the depth/slope issue must be taken into account as I'm certain this deposit is 1400 meters deep but narrows to just 100 meters fairly quick. But, at 1.5km long that's a huge resource.

By adding this as a potential (8% of a proven value) it looks like we could be asking for 4.2 billion dollars. I did take into account that we have nothing more than a potential on the SW deposit because it only appears to be a deposit. Given this, I question Teck taking the whole thing out. Too much is unproven so we would have to take a very large hair cut on what this could/should be worth. The $7.87 still holds for the drilled properties and the rest is worth close to $2.5.

Anything under $5 and we should refuse to sell. The expense forward vs the return on a 10 year basis makes it much to our advantage to stay put. Consider the area of inclusion and our right to sell our applicable portion to who ever we want. 2 Billion is not unreasonable when you consider the prepaid expense in the form of the "Earn Back In Option" the time requirements for it and the finance of the development. It's almost a free ride. Yes, Teck should be entitled to the cost of money for the portion the finance for us but consider the next couple of years of global markets, finance and stability. All this on their dime. They cannot charge us a risk premium on the forced finance! Suppose that the next 5 years are so bad that only the trulely stupid would build a mine. Under our contract Teck would have no choice other than abandonment. Now that's a rock and a hard place. This does appear to be what's in store for the future.

If we know that we command about $10 a share in value what price should we settle on to get our money out? How long would we be willing to hold to get the full value and what do we think about future risks to money? Using a simple graph of expectations vs real value the lines cross at about $5.95.

Incidentally, gold and copper will go up 1/3 on another QE with copper settling back as the QE fades due to failed productivity. The only real effect will be devaluation which will reduce the Chinese lead in exports ironically slowing their economy but that is offset by the gains in exporting by the USA and the EU. (Money wars). Mind you, adding $500 to an ounce of gold makes our product all the more enticing.

I conclude from all this that we should still hold long. Despite all the desires to get out the real value is in the mine. The metals we produce are largely necessities including gold. (Banking and money rule changes). This is becoming less about cents per pound and more about security. Looking at Western Copper, discussed with Jason as a comparison tool, I'm still of the opinion that cuu is better and becoming even more so. If you just look at these two from a grades/size/cost perspective then Western looks better. Factor in roads, water and the host of other factors and cuu starts to outpace them rapidly.

Next week should begin to detail what the market really thinks about us. Assays should come in and the other NRs should start to cue up.