Acadian Mining Corporation ADAIF

ADA - TAM - valuation relation

[loparn]

There are around 155 million fully diluted shares in ADA (105 + 22 at least per Sept 30 according to Sedar, + 28 new PP, if the no new PP:s have occured after sept 30 and before the new one). Tamerlane ventures (TAM) has 41 million fully diluted shares. Therefore ADA has a 1.06 x 155/(0.53 x 41) or around 7.6 times the market capital that of TAM. The Resource Investor article ADA calculation as of January 10 corresponds to a cash flow CAD 0.31-0.41 per share if you consider the stock dillution after the new PP (with the RI $1.50 zinc and 70 cent lead assumption and also including their expected 25 % production increasement over the feasibility study level). That would give a p/cf 2.6-3.4 (before tax) now, which seems rather reasonoble or a little bit too low. According to RI ADA also has a potential for CAD 1 or more in their "hidden assets". It seems that the hidden assets then is the big undiscounted potential. If you do a similar cash flow calculation on Tamerlane Ventures, TAM, you find they may get around CAD 1 in cf/share even if you assume a high dilution to 100 million fully diluted shares. I think more realistically one could expect 1-2 CAD/share in cash flow due to less stock dilution with some debt financing. If you take the same cf 2.6-3.4 multiple as in ADA you get CAD 2.6-6.8 potential for TAM, that is around 5-13 times the current stock price(CAD 0.53 March 16). ADA then with CAD 1.06 for the zink & lead-business (with p/cf 2.6-3.4) + the according to the Resource Investor article indicated CAD 1+ potential for the hidden assets, may have a likely stock potential of let´s say CAD 2+ or around 2 times the current stock price. So TAM should have around 2.5-6.5 times higher relative stock potential than ADA (using p/cf 2.6-3.4 in both cases) and with the ADA potential compensated for their hidden asset. Since TAM could be up to 2 years behind ADA in production start, the discounted relative higher TAM potential should be reduced to around 2-5 times. This could be interpretated as TAM has a probability, roughly speaking, of around 1/5 - 1/2 to achieve the production phase which ADA has reached now, a probability of 20-50 %, and as a 50-80 % probability to for TAM to crash completely, if you just look at those to possibilities as the only alternatives, for simplicity reasons. One big risc factor for both companies is much lower zink&lead prices in the future. It would affect both stocks severely compared to their potential calculated here. Hence I find the risk/reward to be more attractive in the TAM case, with their by their low market capital discounted low probability for success. Therefore, if TAM do manage to reach the current ADA status of a beginning producer, TAM should outclass ADA as a long term stock position, and the risk/reward for that seems fine enough to me. https://www.loparn.com with TAM analysis and more.