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Where to now with Rubicon Minerals - RBY ?

|Includes: Rubicon Minerals Corp. (RBYCF)

I've been following Rubicon Minerals since it was at $.89 a few months back.  It's taken a huge run to approximately $4.00 at present.  Is it time to take the money and run?  What to do with Rubicon from here? To answer that question, I need to have some idea of what RBY may be worth so I'm going to attempt a baseline evaluation of Rubicon. In an article on Mineweb about Exeter Resources (http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89192&sn=Detail) it was stated that the top 10 miners, reflected in their market capitilization divided by their gold ounces in the ground), shows a value of $143 an ounce for their compliant resources. Well, Rubicon is right next door to GoldCorp which the same article says is valued at about $440 for their ounces in the ground. GoldCorp also acquired the Bruce Channel Deposit (NYSEARCA:BCD) via the Gold Eagle acquisition for something around $240 an ounce and the BCD is next door too and the largest stockholder of Rubicon is the guy that started and built GoldCorp into the powerhouse it is.

So, I'm asserting that it's reasonable to assume Rubicon's ounces in the ground are worth the $143 in the ground ounce average. That may sound like too much for a junior exploration company but I think that's conservative given the tenor of the assays, lack of political risk, quality of management, cash position, no debt, etc.

This leaves one to determine how many ounces they have. In the absence of a full blown 43-101 being available, one is left to less rigourous devices. On the Rubicon site, in a presentation, they say their ore body, so far, is of the dimensions of 1100 Meters by 300 meters by 1100 meters. They also show the distribution of assay results. The lowest result they report is 3 grams a ton. The following is an attempt to convert that info into some useful approximation of what Rubicon has based on what we currently know and what it would be worth per share if valued at $143 per ounce. The critical assumption that I'm making here, in an attempt to come up with some baseline value in light of Rubicon's strong run up already, is that only 10% of the orebody is of 3 gram per ton tenor. As we all know, they have hundreds of assays of 15 grams per ton and even much, much higher. One of there recent assays in from drilling southwest of the original F2 zone was for north of 12 grams per ton over 140+ feet.  So, assuming 10% of the ore body to be of a 3 gram per ton tenor seems defensible to me. Here's the result.

Width   300
Length   1100
Depth   1100
Cubic Meters   363,000,000
Tons per Cubic Meter   2.35
Total Tons   853,050,000
% at 3 grams   0.1
Tons @ 3 grams   85,305,000.00
Grams Contained   255,915,000.00
Grams Per Tr. Oz   31.1
Ounces Contained   8,228,778.14
In Ground Value Per Oz.   $143.00
Value of Deposit   $1,176,715,273.31
No. Shares   192,300,000.00
In Ground Value Per Share   $6.12

In other words, it would appear that Rubicon is currently trading for about $2 a share less than it's arguably worth on a conservative assessment of what they have at a reasonable value for in the ground ounces. It is also not so silly to think it could be worth $30 a share by the time they finish this current drill program if they extend the orebody and keep hitting bonanza grades.

Yes, Rubicon has moved a long, long way from the $.90 a share I first bought at but I'm still a big buyer at the current price of appox. $4.00 per share.


I'm long RBY, short the Rubicon March 2010 7.50 call options, long the March 2010 $2.50 RBY calls.