March 4th, 2009

AGQ is another junior (soon to be) mining company. For those of you who are familiar with the story of Novagold, you'll see that AGQ has a lot of similarities. Novagold has huge resources of metals (mostly precious), whereas AGQ has a - not exactly huge - but large resource. Novagold has a mine that was in production recently and probably will be again soon - and so does AGQ. I'm not 100% on these numbers, but last time I looked I think that Novagold had something close to 30M ounces of gold, and an mcap of CDN$250-300M. AGQ has about 80M ounces of silver equivalent and 2.55M ounces gold (in total ~4M ounces of gold equivalent), and an mcap of only CDN$8M. Although the numbers for Novagold are not 100%, I think this relation is pretty striking: for AGQ to be on a similar valuation as Novagold, they would have to be valued almost ten times higher. Of course one could easily argue that Novagold is grossly undervalued, which would make AGQ ridiculously undervalued. Another thing that speaks in favor of AGQ in relation to Novagold is the fact that they still do not have any large loans, which is something that Novagold has.

So, let's look at the projects of AGQ: There are three main projects; the first is the San Jose project, which was a producing mine until 2001 - which means that pretty much all the infrastructure is in place already. San Jose holds about 80M ounces of silver eq., with high-grade silver along with zinc and lead. The property has a huge potential to expand, and ongoing exploration keeps showing up great results. The mine is set to re-start production in 4Q 2009.

The second project is named Calicato. It does not yet have a determined resource, but is considered to have potential for over 25M ounces of silver eq. The average grade so far has been 200-250g/t silver and 0.5-1g/t gold, along a vein-system of (in some cases) over 4m width.

The third project is named Tepal, which holds a 2.55M ounces gold eq. resource. It's a copper-gold-silver porphyry project. It has seen exploration since the 70's and is still open to further exploration in many large areas. The average grades are so far 0.47g/t gold and 0.24% for copper, whereas the silver has a very marginal importance.

I know some of you might think that the comparison with Novagold was a little out of place - after all Novagold has projects or stakes in projects that are huge and with much better grades than AGQ - but the most important thing today is to get some money flowing, and in that case they are very similar. Both of them are going to have trouble getting money to keep things up until they can cover their expenses by an operation (I also talked about this in the Oroandes post). But both Novagold and AGQ have some great projects and by the looks so far, they are still able to raise money.

By just looking at the valuation of the peers of AGQ, it does look very undervalued. It is only a few million dollars away from the same valuation as Oroandes and other junior explorers who are just valued on the hope of big findings - AGQ has already got big resources and an operation that is about to start up in a couple of months ... and that should count for something.