European Gold Share Discussion Threads

[caiman27] 17/11/2006 15:57

My calcs are basically very similar to the City analysts - if you use DCF analysis and a defendable set of metal price forecasts and some risk discount you will end up around 280p.

If you assume that all ounces are equal in value then you will end up with a spurious (large) number. As should be obvious. And no, it does not come out in the wash. Value is earned at the bottom line, not the top line.

[wassapper] 16/11/2006 16:52

caiman - Fine - show me your calcs. I am happy to be proved otherwise.

Brokers never give a buy out value. Their targets are always cautious and they revise upwards if and when a company progresses. Their job is to be cautiously optimistic or otherwise. They wil all use similar base figures and similar models so it is no surprise that they come in fairly similar. In a buy out situation such numbers go out of the window.

I do not agree it is a discredited method. It demonstrates an average price paid which provides an indicator. Sure corporate HQ of takeover company is not going to use it and they will employ DCF etc, but it all comes out in the wash in the end.

The value in EGU is polymetallic; high and growing resources/reserves; location; already mining; low cost of production; a lot of capex already committed; great management; and no Frank T amymore!

[caiman27] 16/11/2006 15:49

Wassapper, that value per ounce stuff has been totally discredited - it completely ignores operating costs, capex, risk etc etc so has been promoted by N American companies to prop up some spectacularly unwarranted valuations - Bema being maybe the worst offender. The 1% margin ounce is worth the same as the 50% margin ounce. Or maybe not. The N American punter market still seems to think it matters but it has no solid foundation.

If you do some basic DCF you may end up in the same area as the professionals -I think it is very encouraging that they have ended up with similar numbers way above current share price.

As for not researching widely enough, suffice that those who know may laugh.

[wassapper] 16/11/2006 15:35

Caiman - good points but I don't see politics or permits as an issue now. Even Greenwich Resources , now Scarborough is making headway in Greece.

I am not gong to repeat my calcs. They are above. You are not reading. I did not quote gross values. I based my valuataion on a value for reserve and resource gold ozs commonly used as a valuation basis for companies with P&P resorces and reserves (each a different value) and threw in $500m for many billions of dollars worth of base metals in the ground.

Happy to be proved wrong but I don't think you are researching widely enough. Show me your calcs!

[caiman27] 16/11/2006 14:54

>seagreen - too true

> others: Those Analyst valuations all have a significant discount to take account of the fact that the next three projects do not have permission to construct - the Greek authorities do not have a great record on this though the legislation has improved in recent years. So yes there is very considerable upside but do you want to fully discount all of that risk right now??

Wasapper - your $3.5 bn is way above the risk free number so I really don't understand where you are coming from. Mining companies are fundamentaly worth the net value of their permitted and available and technically viable assets, not the gross value.

[buffin] 16/11/2006 14:05

Meaty trades going through again today.

[seagreen] 16/11/2006 11:25

caiman27 I know, I know... but as I understand it you dont have to declare CFD's

[wassapper] 16/11/2006 11:20

Analysts will never stick their necks out. Those prices are short term, and we would like to see them, but they are not take out prices.

Read the bit above the broker forecasts about the value place upon EGU gold resources and reserves of $51 per oz compared to an industry average of $170 per oz: and that is not the take out price.

With all the base metals and its secure location I still stand by my estimate of $3.5bn for the whole lot.

[caiman27] 16/11/2006 10:52

Current value forecasts are RBC: 280p, EVO: 290p, T&G: 280p, Seymour ??

[buffin] 16/11/2006 10:35

The factsheet on the company website shows Evolution suggesting a current value of 290p on 13 November.

[caiman27] 16/11/2006 09:36

> seagreen - as I understand Frank T sold his holding in EGU to add to his holding in SLD and/or Regal. The EGU stock was placed with institutions in N America.

> others various - the Barrick "bid" was a story made up by the Times journo. The price mentioned is laughably low - the various recent research notes are pointing to a value some way north of £300m.

[wassapper] 15/11/2006 23:10

Chipperford - sorry you are not correct. It is common practice to value a resources company on both resources and reserves. Different value attributed to each as resources are of course more speculative but they will have drill results to give credence. I split my calculations in this respect. Read the links I posted to help add some background.



see also

My bet is this company will go for at least $3.5bn. I value the base metals at the very least as $500m.

Our Canadian friends seem to believe that there is more to come - we closed up 7% in Toronto.

We are in a period of consolidation for miners. EGU has all the right characteristics - polymettalic; low cost to produce; proven profitability; very big reserves and resources in a politically stable location. It will be taken out.

[simon54] 15/11/2006 21:23

Fairy nuff. I take the view that a successful relationship in Greece will generate more success, and that once the further licences are secured the rumours won't be about £250m. Just stating the obvious there ;-)

[mattybuoy] 15/11/2006 21:15

I think someone in the media just noticed this company and how under-valued it is ... Will that do for a conspiracy theory? ;)

As Chip says, it's a good investment regardless of any takeover anyway.

[simon54] 15/11/2006 20:39

Well, I already have some Chip - did my DD but have forgotten it all now. My head's getting leaky ;-) Cheers!

[chipperfrd] 15/11/2006 20:33

Simon - frankly, it is probably best to ignore the media 'puff' as it may come to nothing. I don't think it is ever a good idea to buy on possible M&A activity.

On the other hand you might consider that the earnings growth prospects are excellent and buy for capital appreciation (after good DD of course).

[simon54] 15/11/2006 20:00

So what conspiracy theories might there be regarding the rumour and denial? Informal approaches from Barrick, but no formal offer yet? £250m mooted informally but rejected? All a load of cobblers? Hmm, chewing over whether I should be buying more (I'm sure you guys would recommend it!)....

EDIT - Matty, is the limitation of your valuation approach based on your 'reserves in production' figures maybe that, although the company is in production, not all areas of the reserves are accessible to production yet?

[chipperfrd] 15/11/2006 18:46

wassapper - I agree with Matty, the reserves are the commercially economic part of the resource.

I also think it advisable to only value Certej in terms of the resource as the reserve is only classified as 'probable'.

It does all add up to a very good valuation notwithstanding. But let us hope that the issue of takeover value does not transpire - at least not whilst the share price is down at these levels.

[mattybuoy] 15/11/2006 18:44

I could have sworn I saw that EGU stated that the Resources included the Reserves. Can't find it on that page now though ...

Oh well, like you say it's a lot of stuff whichever way you look at it :)

[wassapper] 15/11/2006 17:49

Matty I could be wrong - I don't want to be :-))

See here for the source

Reserves and resources have different standards and are always reported separately. I have tried to show the workings above for each country and either resource or reserve and add the possible takeover value together.

Must dash. Happy to continue to converstaion and be proved wrong.

Bottom line is there is a LOT of upside to this company for us all

[mattybuoy] 15/11/2006 17:07

BTW rambutan, absolutely right. Any deal which Aktor does not totally approve of would be a bad idea IMHO.

[mattybuoy] 15/11/2006 17:01

wassapper, the resources include the reserves. So you can't add them together, unfortunately ;)

I do agree that £250m is a stupidly low price mind you.

[wassapper] 15/11/2006 09:22

Note just edited my past post as I had mixed up a couple of numbers. Happy for checks or validation.

[seagreen] 15/11/2006 09:11

caiman 27 fair point... but I can only tell you what he said...I have no idea and none of my business what his interest is now but there are many financial instruments where you can maintain an interest in a stock without having to declare it...