Signal Gold Inc T.SGNL

P/E Ratio and Non Sense

[DoumDiDoum]

Welcome Freddy to the board.  Your question is ligitimate but take posts from Shiftyone with a grain of salt as he has tendencies to be quite negative about the company and he did some calculation mistakes in the past. He is not an accountant and the proof is that he uses the term "Revenue" to refer to profit in his final equation. Moreover, he did not use the Feasibility Study numbers which would have been more to the point.

You can start your due dilligence by reading the feasibility study available on the company's web site at read the sum up here. Below is Shiftyone's non sense answer with some comments in yellow using facts from the Feasibility Study.

Shiftyone:

100 000 oz per year. (it's an average over the mine life for Phase 1 ONLY)

A great number is profit $500 US per ounce.  But we will use $800 (current FS is talking about US $1000/oz profit at US $1850 gold price)

100 000 * 800 US= $80 million/year "profit" (at actual gold price it's US $115M profit)

Start up costs after paying debt.  $350 million plus.  With interest over 5 years is $400 000 000.(400 million).  Divide that by paying the loan over 5 years.  $80 million a year to cover start up costs. (the FS has calculated all that and the payback period is 3 years after tax)

That does not include further exploration etc.

Revenue.  $80 million/year (that's a big fail here. At current gold price, revenue is US $200M/year)

Debt payment $80 million/year (it's not that simple and straight forward. The FS has figured it all and it will take 3 years to pay the debt.)

I don't see a particularly high P/E ratio in the near term (I'm not surprised about that conclusion, but estimating a P/E ratio is pure speculation so I cannot say anything except that he is vague as he does not define what are "particularly high" and "near term".).  There is only 10 years of mining right now. (False. There is 11 years of mining and this is only phase 1 numbers. The underground reserve is not included yet. The management team is talking about a multi-generational mine at Gloldboro (more than 25 years of mining)

Giving an estimate for the P/E ratio for a non-producer in the gold junior market is very speculative. Sprott Equity Research is using the P/NAV ratio instead. In a recent analysis about SGNL, they indicated that the P/NAV ratio is about 0.7X for the market but only 0.1X for SGNL stock. So right there, you get a 7X bagger using this ratio. We will have a better idea of the P/E ratio after the ramp up is done.

However, what could boost the P/E or P/NAV ratio after production has started at Goldboro is the exploration upside of the third open pit west and also the drilling of the underground resources which is open in all directions. Seeing the reserve growing when the debt has been paid 3 to 4 years after production has started is quite promising as future revenues will be down the pipe and will impact the P/E ratio positively.

An updated feasibility is coming soon so we will have more updated numbers to crunch on.

GLTA