Gold is up a little -- NPV calculationFIU says they will be able to mine 6.8M oz of gold from 2011 until 2029, and I believe them. What's the value of a $20 increase in the price of gold per ounce, assuming (1) they are already profitable before the increase (2) this price increase is not followed by an increase in mining costs (3) the increase is permanent (4) the cost of capital is 15%.
$53 Million ($9M x 15 years discounted)
The market cap of FIU could have (should have?) reasonably moved up by $53M (a small upwards adjustment of
.29) but it didn't, so either the shareholders of FIU don't care about the price of gold, or maybe there is a complete disconnect between the shareholders selling and buying this stock and the value of the mine. If the probability of failure for FIU shareholders is near 100%, shouldn't the short position be higher?
Show me some conviction, and maybe I'll change my mind.