THUNDER MOUNTAIN GOLD INC (THMG) stock intrinsic value fair value estimate & owner earnings analysis

Thunder Mountain Gold is a pre-revenue mineral explorer. Its main asset is the South Mountain zinc, silver, gold, copper and lead project in Owyhee County, southwest Idaho, which it controls through a mining lease with an option to purchase, granted by its 75%-owned subsidiary Owyhee Gold Trust, for a capped $5 million. That option expires in November 2026. The company has never sold anything, so there are no earnings to value. Our owner-earnings measure (operating cash flow, less working-capital timing, less the cost of shares and options handed to insiders and consultants, less capital spending) was negative in every year from 2016 to 2025: between about -0.4 cents and -2.0 cents a share through 2024, with a ten-year median of about -1.0 cent, and about -3.5 cents in 2025 (against about -0.9 cents in 2024) as drilling, professional fees and option grants rose. Our first-year assumption of about $3.8 million of cash spending, roughly 3.6 cents a share on the enlarged share count, is in line with that 2025 result, not better than it. Unpaid officer pay was treated as a cost when earned, and the $1.1 million now owed for it is treated as a debt. The share count has grown from about 51 million in 2016 to about 95 million by mid-2026, and to about 105 million after the August financing and the planned pay settlement described below. The shares therefore rest on three things: cash, the deposit, and what it costs to turn one into the other. Cash and obligations. By August 7 the company held about $3.4 million of cash, including about $2.8 million of subscription money for a private placement; the placement closed on August 21 for $5.66 million gross (8,090,451 units, each with a half warrant exercisable at $1.00). Allowing for spending since, we estimate cash of about $5.6 million today (an estimate, because the latest quarterly report predates the closing). Against that the company owes about $1.1 million of ordinary liabilities, including a $205,000 note on a land purchase, plus $1,104,625 of deferred pay owed to its president, a technical advisor and a former CFO. In July the board approved paying that deferred pay in about 1.58 million shares, subject to TSX Venture Exchange approval; we treat it as done. That leaves about $4.5 million, roughly 4.3 cents a share, before further exploration spending, and spending of about $3.8 million a year would use it up in about 14 months. About 22 million older warrants (exercisable at $0.10 to $0.40) and the new warrants are not counted, because none of the values below reach their exercise prices. The deposit. South Mountain has a resource estimate effective December 31, 2023 of 223,000 tons measured and indicated (about 9% zinc, 4.3 ounces of silver and 0.06 ounces of gold per ton) and 959,000 tons inferred. It has no reserves and no completed preliminary economic assessment; the company lists one as its next step. What can be evidenced is what outside parties have paid. BeMetals took an option in 2019 and paid $1.1 million in cash over 2019 to 2021 plus 10 million of its own shares (worth $1.88 million when issued, and about $1.39 million once part was sold and the rest marked at the end of 2022); the option was terminated by agreement in December 2022. A Swiss investor, MFD, signed a letter in January 2025 to fund $1 million of project work in exchange for a 10% interest, but the reimbursement total was $203,498 at year-end 2025 and unchanged at June 30, 2026. That is the evidence we use. Base case, about 4 cents a share. Drilling and the economic assessment run through mid-2027, using about $2.85 million and leaving about $1.7 million of cash. A partner then signs an option on terms like BeMetals': cash of about $1.1 million and shares worth about $1.4 million after allowing for what BeMetals' shares later proved worth, paid over several years, with the partner paying for further work. The leftover cash is worth about $1.6 million and the partner payments about $2.3 million today, together about $3.9 million, or 3.7 cents a share. The ordinary creditors' $1.1 million is already deducted in the $4.5 million above, and the only borrowing is the $205,000 land note. If the deferred-pay settlement were not approved and the $1.1 million had to be paid in cash, this case would be about 3 cents. We credit only a repeat of a partner deal the company has done before. We leave out resource growth from drilling, higher metal prices and any production, because none is secured. Bull case, about 8 cents a share. Drilling extends the zone that remains open at depth, the assessment is completed, and a partner pays what MFD's letter implies for the whole project, a $10 million value, of which the company's 75% is $7.5 million, received over about three years and worth about $6.9 million today. With about $1.6 million of leftover cash that is about $8.5 million, or 8 cents a share. This requires MFD, or a party like it, to actually perform, which it has not yet done. Bear case, nothing. The November 2026 option lapses or can be exercised only through a heavily diluting raise of about $5 million; drilling and the assessment do not show economics that justify development; and no partner returns, as after BeMetals' exit in December 2022 and as junior explorers found in the 2008 to 2009 and 2015 to 2016 base-metal downturns. Spending of $3.8 million a year consumes the roughly $4.5 million of net cash by about the end of 2027, there is no revenue to fall back on, and further raises dilute holders toward nothing, as the share count has done for ten years. The case is zero rather than negative because the company has no large debt: the land note is $205,000 and no maturity or covenant materially affects the outcome. Margin-of-safety price, 2 cents. We are certain of the earnings level only in that it is negative, and our confidence in any positive value is low. The worst plausible outcome is losing the right to the project in November 2026, which the filings do not describe the consequences of, or spending the cash on drilling that finds nothing; with almost no debt nobody could force a liquidation, but shareholders would lose their money. The things we are most likely to be wrong about are whether a partner appears at all (BeMetals did, then left; MFD has funded about a fifth of its commitment in about 18 months) and whether the pay settlement is approved, which moves the base case from 4 cents to 3 cents. The price assumes a holding period of two to three years for drilling and an economic assessment to show whether the project is worth a partner's money, and the business pays nothing during that time. At 2 cents the whole company is priced at about $2.1 million against about $4.5 million of net cash after every recorded liability, so even if management spends a good part of that cash before anything turns up the price leaves room, and a partner deal like the one BeMetals signed would imply a return comfortably above the 20% target. That price applies only once the November 2026 option has been extended or exercised with the funding in place. Our previous estimate (base about 2 cents, bull about 6 cents) was set on the June 30 balance sheet and is not directly comparable. The main change in the business since then is the $5.66 million raised in August and the board's decision to pay deferred compensation in shares.