BUY target .59 - Fundamental ResearchNot sure if everyone has had a chance to review this report (?) although they dropped their target, they seem to believe that NGG can be cash flow positive through 2009 (?)
https://www.researchfrc.com/research/pdf/NGG/NGG%20Update%20-%20March%202009%20FINAL%20REPORT.pdf
Here are some tidbits:
Based on our discussion with management, the company has
budgeted to spend about $1 –1.5 million on the second crusher, and about $3 –4 million on
exploration on its properties. In 2009, based on a capital expenditure estimate of $5 million,
we believe the company will be cash flow positive and need not need to raise further capital
during the year.
Our revised valuation of the company is $0.59 per share compared to $0.75 per share in
our previous report.
Valuation Summary
Sinivit 0.22
Imwauna + Weioko 0.30
Mt. Penck 0.05
Interest in COY 0.01
Working Capital 0.02
Debt (0.01)
Fair Value 0.59
- In this report, we have valued the company’s Imwauna and Weioko properties together as we think the two properties are likely to be developed as a single operation.
- Increased long term operating costs from US$200/oz to US$250/oz
- Reduced gold recovery from 88% to 80%. Although we believe the company has not
achieved a recovery of 80% in Q3 2008, based on our discussion with management, the
company is targeting 80% as an average recovery rate, which we believe is reasonable for
the Sinivit mine.
Based on our review of the company’s progresssince our previous report and our
revised valuation models, we reiterate our BUY rating on the company but lower our
fair value estimate to $0.59 per share.
Gold Price (US$/oz) Fari Value
500 0.43
600 0.59
700 0.74
800 0.89
900 1.04
1000 1.19
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I like their numbers, relating to the valuation of share price compared to price of gold.
WHAT I DO NOT LIKE is their inability to state the issue of the multi-million NGG shares held by the bankrupt MacMin Silver, and the impact to NGG share valuation should these shares be sold at market.
IMHO once the MacMin Silver issue is cleared AND Sinivt production is normalised, we should have no probelms reaching .59.
Anyone care to comment ?