Talking about Valuation !!
- The market cap for EDV is now pretty close to the cash balance they have as per their last Quarter reporting.
- In other words, based on current share price, the entire share float can be bought with cash on hand.
- The market is now pricing EDV share price at pretty much "ZERO" because the value of the shares is now almost equal to the cash they have on their balance sheet.
- All the mines, production, indicated and inferred resources that EDV has, is being estimated at around 300 million dollars which is the debt that they own.
- Anybody out there who wants all the 4 running mines, all the gold in the ground with AISC of approx $1050/ oz and an approx production rate can buy it for $300 million !!
- Just how sweet this deal is..... well... the cost of getting one mine in operation is $300 million+. These guys have four operating mines !!.. Their net profit at a Gold Price of 1200 isapprox $53 million per year. And most of these mines have a life span for more than 8 - 10 years at current proven resource.
- The question then becomes..... why is the market cap so low..... and..
- Is management looking at this "Once in a LifeTime" opportunity to buy back shares and reduce the float to let's say 50% of what it is currently. It will only cost them 90 million to buyback half of the shares o/s at current price levels.
- Their debt can be paid off in 5-6 years if EDV sustains an AISC of $1050 or lower and sell Gold at at least 1200 or higher.
- So let's take a look at a hypothetical scenario that EDV does decrease its share float by 50% using a share buy back and also becomes debt free in 5-6 yrs as noted above.
- Let's now look at Semafo. Current market cap if close to $750 - $800 million. No debt and a share float approx 30% less than EDV. AISC is higher than EDV and production profile is way lower than EDV (so way less earnings and revenue).
- Based on my analysis, EDV is now being "punished" because it has debt. There is no other reason whatsoever that EDV is being priced at 70% less than SMF while the fundamentals warrant that EDV should be valued higher than SMF.
- Let's see what the "Smart Management" has to say about this dismal valuation of EDV in their Q-4 and full year production reporting as well as their forward guidance for 2014.