OTCPK:NGMBF - Post by User
Comment by
Durkastanon Jul 28, 2010 3:12pm
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Post# 17304267
RE: RE: Edson88888...
RE: RE: Edson88888...Edson, you're right in assuming that a higher grade coal should increase the company's value. And in the grand scheme of things, it does. It's just that operations are too small at the moment to really give the boost you're looking for.
I don't have the free time to try and make a detailed valuation of the company, but... a very quick and dirty analysis:
The market cap is currently 20.9m, give or take.
With a 5 year mine life and a discount rate of 10% (debatable! but probably fair for this company), NAG would have to create free cash flow of about $5.5m a year in order to justify its current share price, assuming the market is not already discounting some of the value of mine 3 and beyond.
So, let's say they mine their 10,000 tons a month., or 120k a year. They would need to profit (cash) about $46/ton in order to fit market expectations.
To recap, if you believe that:
- mine #2 has a life of 5 years, and
- that they will profit $46/ton off of every ton of blue gem/jellico that they mine, and
- mine #3 and beyond will never materialize
then this stock is roughly fairly valued at this point in time.
Don't take my word as gospel, this is a quick and dirty analysis only. There are all kinds of "what if"'s and sensitivities you could adjust.
In my personal view, the market is barely discounting mine #3 and beyond at this time, for whatever reason. Hence, I believe that as mine #3 comes closer to fruition, we will push well over .20.