Is it true "tanzanian royalty exploration: Fool's gold"?

engmtolera · 2011-06-11T12:15:06+00:00

The rising tide of gold prices has lifted the market value of Tanzanian Royalty Exploration (TRE) to ridiculous levels. The stock has gained over 350% from a 2008 low of under $2 to a current price of around $6.90 There are 94 million shares outstanding, giving the company a market cap of $650 million. That is a tremendous market cap for a company that has less than $50 million of assets. TRE is a Canadian company listed on the NYSE Alternet under the symbol TRE (changing to TRX on June 15th), and on the Toronto Stock Exchange symbol TNX. The company explores for gold in Tanzania. While I don't really have an opinion about the ultimate level of the price of gold, I think that the speculative bubble in exploration stocks will burst, and this stock will be headed to $0. The company is a serial issuer of stock and has no revenue. By virtue of accounting treatments for exploration companies that allow exploration costs to be capitalized rather than expensed, Tanzanian Royalty Exploration has an artificially inflated book value of about C$0.35 per share. That gives the company That gives the company a price-to-book ratio of around 20. After adjusting for capitalized exploration costs, I estimate the real book value to be zero.. WAVUTI

Thread starter engmtolera
Start date Jun 11, 2011

engmtolera

JF-Expert Member

Jun 11, 2011

i411

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