fair value for TV TV currently is valued at around 60% book value. Normally, the profitable company that Trevali now is - an easy, but wrong calculation would be that TV would have to be repriced to around 40% over its current price.
Why is this wrong though? Because TV´s book value is based on a zinc price of 1.15 USD/lb. In 2020 that was too high for most of the months and I remember some posts here remarking (formerly corrrectly) that the low price to book value for Trevali was in fact not that low as one had to factor in zinc prices at 1 USD/lb or even lower.
Now the contrary is true: zinc prices are at around 1.28 USD/lb so the current PBV is way too low. We re therefore not at 60% of book value based on current zinc prices, but at maybe 40% as it makes a HUGE profit difference to gain 15 or 28 cents per pound.
Further factoring in that Treatment Charges are still only between 90 and 110 USD and that therefore till March we will very probably see TC be fixed at around 200 USD for 2021, adding around 10 more cents profit per pound, this means that TV is currently "worth" around 3 times the market cap.
If - just as an add-on - one would imagine zinc going up further with the Biden admin spending in infrastructure like the Chinese already do and the Europeans starting this as well in spring, then - with zinc at around 1.50 USD/lb we d have to see TV 5fold to get a fair value, pushing the stock back to around 1 CAD.
Imo the share price will adapt further with the new numbers coming out in February, not before, as the big funds are waiting for those numbers to get out, for the going concern wording to be definitely lifted and then will invest. My best guess is that even with zinc maybe rising further, the stock will only rise slowly till Q4 numbers as zinc is not the only material to rise, the investment world concentrates more on copper and Trevali is just not a "public story" yet before getting the (probably brilliant) numbers out.
I have added to my long-term position again. The warrants that are out had and have a limiting effect on the share price, but with TV getting in more and more profits day by day, the "value train" has now - after a few weeks - more ore less digested these supplementary shares - imo.
I do appreciate that management played it safe, hedging part of the production and having increased capital.
To those remembering my last posts in September October November - I was distracted with other investments - investing is not a monogamy play :D
Wishing all of you a great New Year 2021 btw :)