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San Gold Corporation - Country Risk Analysis

San Gold Corporation - Country Risk Analysis

Country Risk Analysis as of July 12, 2014

To determine if the company complies with my third precondition, I have assessed the company's country risk with the help of my own Country Risk Ranking System (CRRS), which is explained in this article.

Summarized, UndervaluedEquity.com's CRRS:

Country Risk Resources  CRRS Color Code 
The Coface Group's Ranking A1 A2 A3 A4 B C D
A.M. Best's Ranking CRT-1 CRT-2 CRT-3 CRT-4 CRT-5
The Fraser Institute's Rank Range 2012/ 2013 1-19 20-38 39-58 59-77 78-96
UndervaluedEquity.com's Country Risk Tiers CRRS-1 CRRS-2 CRRS-3 CRRS-4 CRRS-5
Corresponding weighted average  4.50 - 5.0  4.00 - 4.49  3.00 - 3.99  2.00 - 2.99  1.00 - 1.99 

For more information about how to conduct your stock's country risk analysis , please visit the following page: Country Risk Assessment - 14 Free Resources for Conducting Your Stock's Country Risk Analysis

Properties Overview

Project Name  Project Phase(s)1  Exploration Category2  Country 

Sub-National Jurisdiction
(if applicable)

 
Rice Lake Mine  Operations  NA  Canada  Manitoba 
Rice Lake Gold Belt  Exploration  Brownfield Exploration  Canada  Manitoba 

Coface Country Risk Analysis

Country  Canada 
Country risk assessment ranking3  A1 
Business climate ranking3  A1 
Major Macro Economic Indicators  2011  2012  2013  2014(f) 
GDP growth (%)  2.5  1.7  2.0  2.2 
Inflation (yearly average) (%)  2.9  1.5  1.1  1.6 
Budget balance (% GDP)  -3.7  -3.4  -3.4  -2.9 
Current account balance (% GDP)  -2.7  -3.4  -3.4  -3.0 
Public debt (% GDP)  83.5  85.3  87.1  85.6 
(f) = Forecast 

A.M. Best Country Risk Report

Country  Canada 
Latest Report  September 24, 2013 
Country Risk Tier4  CRT-1 
Economic Risk  Very Low 
Political Risk  Very Low 
Financial System Risk  Very Low 
A.M. Best's Commentary  Canada is a CRT-1 country with very low levels of economic, political and financial system risk. Canada continues to have sound macroeconomic fundamentals and a strong regulatory environment, placing it 17 out of 185 countries in the world in the Ease of Doing Business index. Growth is expected to be 1.5% for 2013, accelerating to 2.4% in 2014. 

Fraser Institute's Survey of Mining Companies

Policy Potential Index (PPI)  Score5  Rank6 
Jurisdiction  2012/ 2013  2011/ 2012  2012/ 2013  2011/ 2012 
Canada, Manitoba  73.4  74.6  21/96  20/93 

My Commentary and Conclusion Regarding this Country Risk Assessment

Country Risk Resources  Ranking  Weighing 
The Coface Group  A1 
A.M. Best  CRT-1 
The Fraser Institute's  21 
Weighted Average  (5 + 5 + 4) / 3 =  4.67 
UndervaluedEquity.com's Country Risk Tier  CRRS-1 

The weighted average of UndervaluedEquity.com's CRRS code equals to 4.67, categorizing Canada into the highest Country Risk Ranking possible, i.e. CRRS-1. Thus, based on this country risk assessment, the company passed my third precondition and operates in a relatively safe jurisdiction.

 

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1 For more information about which project phases I distinguish, please visit the following page: Mine Life Cycle - How Accurate are the Resources Reported in Each Project Phase

2 To find out which type of mineral exploration companies I distinguish, please visit the following page: Mineral Exploration Companies - Greenfield Exploration vs. Brownfield Exploration

3 Coface uses a seven-level ranking. In ascending order of risk, these are: A1, A2, A3, A4, B, C and D.

4 A.M. Best uses a five-level ranking as explained in the table below:

Country Risk Tier  Definition 
CRT-1  Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial system regulation with deep capital markets; mature insurance industry framework. 
CRT-2  Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system regulation; mature insurance industry framework. 
CRT-3  Developing legal environment, legal system and business environment with developing capital markets; developing insurance regulatory structure. 
CRT-4  Relatively unpredictable and non transparent political, legal and business environment with underdeveloped capital markets; partially to fully inadequate regulatory structure. 
CRT-5  Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low human development and social instability; nascent insurance industry. 

5 The PPI is based on ranks and is calculated so that the maximum scores are 100. Each jurisdiction is ranked in each policy area based on the percentage of respondents who judge that the policy factor in question “encourages investment.” The jurisdiction that receives the highest percentage of “encourages investment” in any policy area is ranked first in that policy area; the jurisdiction that receives the lowest percentage of this response is ranked last. The ranking of each jurisdiction across all policy areas is averaged and normalized to 100. A jurisdiction that ranks first in every category would have a score of 100; one that scored last in every category would have a score of 0.

6 As an example, a rank of 15/90 means that this specific jurisdiction ranks 15th out of the 90 jurisdictions included in the annual survey.

About Jeroen Snoeks

Jeroen Snoeks - UndervaluedEquity.com

Jeroen Snoeks is the founder of UndervaluedEquity.com, a website for investors passionate about investing in undervalued stocks. Through UndervaluedEquity.com, he shares his experience and knowledge and will soon reveal his personal stock portfolio.


 
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