RE:RE:RE:RE:RE:RE:RE:RE:Cynthia’s post on LinkedIn todayHey @fatls. I agree, multiplying price * number of ounces is one way to value Laurion, but the value of those ounces is only going to be realized over a long period of time (lifespan of the mine), so indulge me in presenting an alternative.
Instead of valuing the total number of ounces, value the number of ounces produced/sold in a single year times the sale price and minus the cost of production. Calculate the yearly revenue from operations and apply the standard price to earning ratio of the aquiror.
For a resource of 10 million GEO, let's assume a 25 year mine with an average yearly production of 400 thousand ounces a year.
In this scenario I am using Barrick as the potential acquiror and my reference is the Yahoo Finance data for Barrick.
Barrick has a gross profit margin of 32%. Lets take an average gold price of $1800, that would mean the Ishkoday would contribute 230.4 million dollars of gross profit to Barricks existing 3.516 billion or 6.5% of the total. Barrick has a market cap of 30.361 billion and assuming the same profit margins and P/E ratio that values the Ishkoday at ~1.97 billion USD or ~7.75 USD/share.
This of course assumes the Ishkoday is in the production stage and the cost of production is the same as Barrick's overall costs. It is flawed because there is no feasibility study on the Ishkoday with estimates of yearly production and the lifespan on the mine. I have made those numbers up and used the 10M Geos, but that is my point.
The Ishkoday is years away from production and to expect full value right now based on price/per ounce doesn't make sense to me, however there are enough comparables out there to dismiss some numbers as being fantasy at present.