Besra Gold (ASX: BEZ) (OTCPK: BESAF) shares are up 34% today. BEZ shares don;t seem to have any specific reason for this, it's more like people just decided they liked the story more today than they did yesterday. This does happen, market sentiment simply turns. The difficulty with this is that there are no news reports of market sentiment. We just get to see the results of changes in the share price. Which, while interesting, isn't much of a guide for us in trying to decide objective value.
We've reported before about Besra Gold: “The Besra Gold announcement of the funding deal is here. The point to note is that this is not, not at all, funding to take Bau into production. The project is nowhere near that stage as yet. Instead Besra is going to redo, makeover, their 2013 feasibility study. This is the stage before trying to raise funding for actual mining. To look at measured and indicated resources and see if they can be proven up into reserves. So, there's still considerable risk over how much gold there may be over in “them thar hills”.” They gained the funding to redo, over, the feasibility study. That's not a proof, of course it isn't, but it is a vote of confidence in the project.
Besra Gold share price from ASX
That there's no certainty here has led to considerable volatility in the Besra share price: “The specific interest today driving Besra up another 40% is that it has passed another one of those roadblocks to success. Recently it announced that it had gained potential funding. As and when Besra meets certain targets then funding will be released. Today's statement is that the first tranche of that funding has arrived. This might all seem like small beer - $2 million at first, $3 million to follow - but the total agreement is for up to $300 million. Sufficient to get Besra to the next major valuation stage of the gold project.This removes substantial uncertainty over funding and thus increases Besra's market capitalisation - and share price.”
There is, as far as we can tell, no new news at Besra but there is still that 34% share price rise. Our assumption must therefore be that folk have changed their minds a bit about how good this project is going to be. Or perhaps their evaluation of the risks here. For that's really what is driving the valuation. If the gold claimed really is there then Besra is worth a lot. But it's the risk of it not being there, or licences not working, or, well, all the things that can possibly go wrong. So, a change in the risk valuation markedly changes the market capitalisation at Besra.
