I have virtually no geological education and absolutely no expertise. From this Message Hub, I’m learning every day. I’m certainly not out to prove any special smarts by posting a long message. In any event, the following, despite its length, is really fast reading because it’s mostly short tables. Of course, I welcome factual as well as ideological corrections.

What I bring to the dialog is my optimistic, yet rational habits of thought. I bring a cool detachment that many others, unavoidably, probably lost a long time ago. I’ve had the better fortune than most to have bought my shares below $0.20. That’s not because I have a greater intelligence. It’s the opposite. The greater authoritative opinions on this Message Hub are from the experts who had the brains to know, at higher prices, GNH was more than worth it. I confirm what others have written, sometimes the market is cruel.

As you would, as when buying real estate, you appraise it by making comparisons. That’s what I’m doing here. Regardless of what’s happened to the stock, obviously the gold is still there. I’ve noticed, most of you haven’t lost heart and still (in spite of a gripe here and there), still stand solidly behind the management of this enterprise. However, speaking for myself, not having sustained any serious loss, I imagine my objectivity is all the more pure.

Pardon me for taking you back to October 2010. Possibly, at that time, the comments of management were more freely expressed and more forthcoming than more recently because of the inevitable fallout from a poorly performing stock.

In October, Sasha Asgary dismissed concerns that the average grades possibly could be as low as 1.4 grams per tonne. His reasoning seems to be just as valid today as the day he spoke.

“The holes drilled into the Ascot/Road Zone were done across strike not along strike to the structure. The zone, which you can see on the maps is a long and narrow zone. The width varies from 5-15m which accounts for the intersections you [“matt025,” on this Message Hub] refer to but is a very long zone which has been traced for over 600m and remains open. The tonnage upside on Ascot/Road will come from the length of the zone. We certainly do have rich intersections over long periods such as results from the bulk sample and the holes into Snow White.”

[Sasha Asgary, Director of Corporate Communications, 10/18/2010]

Having read that and having read many messages by knowledgeable commentators talking about 2.0 grams per tonne and 2.5 grams per tonne, I use those two measures besides 1.4 grams per tonne.

“At the current moment, excluding Ascot/Road and 88/Snow White, I think we are looking at the 20-40Mt range without a doubt. T1 and the T2 Zones are still open. SW still needs work, but is looking like it could be the same type of structure as T1 only larger in which case it will add tons quickly. Beland, Laval’s Mountain and Sugar Bush will prove the existence of a belt.”

[Sasha Asgary, Director of Corporate Communications, 10/18/2010]

Low End “Without A Doubt”
20 million tonnes X 1.4 grams per tonne = 28 million grams
1 troy ounce = 31.1034807 grams
28 million grams = 900,221 ounces
900,221 ounces X $50 ounce = $45,011,050

Middle Ground “Without A Doubt”
30 million tonnes X 2.0 grams per tonne = 60 million grams
1 troy ounce = 31.1034807 grams
60 million grams = 1,866,209 ounces
1,866,209 ounces X $75 ounce = $139,965,675

High End “Without A Doubt”
40 million tonnes X 2.5 grams per tonne = 100 million grams
1 troy ounce = 31.1034807 grams
100 million grams = 3,215,074 ounces
3,215,074 ounces X $100 ounce = $321,507,400

“The goal is definitely still 100Mt. It was speculated to be by the end of 2010. I say speculated because there was never an official NR stating a timeline, nor was there anything in print (i.e. in the presentation or on the website). After all the meetings we have had with analysts, bankers and fund managers, we are under the impression that the market wants to see some benchmarks hit prior to releasing drill indicated volume.”

[Sasha Asgary, Director of Corporate Communications, 10/18/2010]

The following scenarios value more than four million ounces of gold in the ground. Naturally, as the ounces increase, not only does the total value increase but, on top of that, the value of each ounce increases. Obviously, it is no longer appropriate to think of a range of $50 to $100 per ounce when the ounces climb way up there. As follows, I’m suggesting a range of $100 to $200 as more realistic.

Low End “Definite Goal” (after “the end of 2010,” after “some benchmarks hit”)
100 million tonnes X 1.4 grams per tonne = 140 million grams
1 troy ounce = 31.1034807 grams
140 million grams = 4,501,104 ounces
4,501,104 ounces X $100 ounce = $450,110,400

Middle Ground “Definite Goal” (after “the end of 2010,” after “some benchmarks hit”)
100 million tonnes X 2.0 grams per tonne = 200 million grams
1 troy ounce = 31.1034807 grams
200 million grams = 6,430,149 ounces
6,430,149 ounces X $150 ounce = $964,522,350

High End “Definite Goal” (after “the end of 2010,” after “some benchmarks hit”)
100 million tonnes X 2.5 grams per tonne = 250 million grams
1 troy ounce = 31.1034807 grams
250 million grams = 8,037,686 ounces
8,037,686 ounces X $200 ounce = $1,607,537,200

Of course, part of evaluating the entry price of a potentially successful investment is measuring the risk/reward statistics at that price. Not to put too fine a point on this, let’s completely disregard the 100 million tonne “Definite Goal” and, instead, move just above the 20 to 40 million tonne “Without-A-Doubt” Range, using 50 million tonnes. That seems realistic because, as investors, we should not expect to get away with a proposition that has zero doubt. Further, we’ll add another realistic measure of uncertainty by putting those 50 million tonnes together with the 2.0 grams per tonne the consensus (so far as I can tell) of knowledgeable people on this Message Hub estimate.

We wind up with a useful statistic for assessing the risk/reward. On the one hand, for the initial 43-101 resource estimate, we should not expect that the facts eventually released to the press will contain sensational pie-in-the-sky numbers. On the other hand, we should not expect the numbers to be unreasonably low. Using 50 million tonnes at 2.0 grams per tonne as a fairly safe reference point, we should have a better than 50/50 chance of coming out on top of that dividing line, rather than below it. If we’re off, chances are, we’ll only be moderately wrong, at worst.

Better than 50/50 Chance
50 million tonnes X 2.0 grams per tonne = 100 million grams
1 troy ounce = 31.1034807 grams
100 million grams = 3,215,074 ounces

Naturally, for ounces above three million, the per ounce valuation is likely to approach $100, if not exceed it. If we were to pick $93.32, near the bottom of the range, we’d come up with a $300 million resource valuation.

Out of thousands of hours of recent research, I’ve learned of only two other companies (whose resources or enterprise assets I can trust) with such a mismatch between, on the one hand, the value of its present assets and the value of its future prospects against, on the other hand, what investors are currently getting away with paying for those values. At today’s end of the month (7/29/2011) closing prices:

GNH = 0.165 per share = market cap $19.12 million (Canadian) = resource valuation $300 million
FNC = 0.34 per share = market cap $22.33 million (Canadian) = resource valuation higher than GNH
GRRF = 2.01 per ADR = market cap $45.29 million (USA) = enterprise valuation $788 million

In my book, GNH is a member of a very rarified and prestigious elite.