OTCPK:MEAOD - Post by User
Post by
mstettleron Aug 27, 2016 2:34pm
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Post# 25183523
MUX, AR, GCM
MUX, AR, GCMSo today I wanted to discuss valuations on three companies with similar profiles. Really this is more about market distortions. I like MUX but it is priced way out of this world. AR is rational. GCM is irrational.
I'm including 2P oz with M&I oz for the sake of brevity.
MUX - recently traded high at 1.8 billion market cap. No Debt. 2016 production of 144K oz @ AISC of $935. M&I 4.25 million oz gold, inferred 3.26 million oz gold, plus 322 million oz silver in all categories. Operations in argentina and mexico. I for one am not very comfortable with argentina.
AR - recent market cap high at 705 million. No Debt, 55 million in cash. 2016 production of 135K oz @ AISC of $947. M&I 7.86 million oz gold, inferred 86K oz. You will notice that AR has most of it's global resource in the higher confidence categories. A small amount of silver also. Operations in mexico with development in ontario.
GCM - recent market cap high of 25.4 million. Approx 85 million debt. 2016 production of 140K oz @ AISC $811. M&I 12.03 million oz, inferred 3.88 million oz. Significant potential to add to the resource. Operations in columbia.
OK - so GCM has ~85 million in debt but is MUX really worth 69X more? I mean GCM has lower production costs and a larger resource. I don't think operations in argentina and mexico are safer than columbia. In fact MUX was greatly affected when the socialist govt. in argentina wanted to implement crippling taxes. It could very well happen again as the argentinian economy is a constant basket case. If gold were to untimately rise 500 USD per oz that would go straight to the bottom line of each of these companies. The debt that GCM has would not look so terrible as they would have significant free cash flow.
The point of all of this is to demonstrate that in the gold (and silver) mining universe things can get irrational and valuations can be very distorted.