RE: RE: Value at $850 gold is...I believe that valuing a mining company is the most difficult kind of stock to value. Should it valued on a multiple of cash flow? Dollars per ounce? What about cost per ounce of production? What about future capex to maintain the current cash flow level? There are so many variables that it is ultimately subjective.
But LMA is cheap by any measure. If we say that LMA is worth $100 per current resource ounce we have a value of $160M in value divided by 143m shares = $1.10 share. LMA expects to have 2M resource ounces by the end of Q4-8. That would bring us to $1.40 per share. $100 per ounce for a producer is historically cheap.
If we look at the company's book value it is currently about 70 cents per share (C$).
Another thing to consider is that the White Foil project could produce in 2009 as well. White Foil is expected to produce 75,000 ounces per year from my conversation with IR. They are currently working on the mine plan for White Foil. A few years down the road is the Park Dam project which is not far from the White Foil and Frog's Leg project. This appears to be a company with a slow and steady growth in production. In total the company has 30 exploration projects so their goal of becoming a midtier producer is reasonable if they can operate their mines at reasonable costs.
Most importantly though, in the current environment we need to stick with miners who can finance their own operations. Loans for miners are gone at the moment and private placements at today's share price levels are terribly dilutive. What do I care about NAV if a company is not cash flow positive? Look at a company like CRU, Crew Gold, here is a company which had huge assets, 3 producing mines, was supposed to produce 700,000 ounces of gold next year, loads of institutional support, insider buying and nothing but operating losses. The stock has lost 97% of it's value in a year and is now doing equity raises to survive. The previously impressive NAV which was several dollars per share didn't protect them. Ultimately what matters is profitability, for any business.
Happy holiday to all!