NEW August 30 NVO SUM-OF-PARTS valuation.
Previously I have shown a cash flow analysis + NFG expected growth analysis, yielding a price target based on both fundamentals and technicals, leading to a 7,62 USD price target.
This stands! Backed up by several other methods of analysis. Price pattern analysis. Fibonacci analysis. EW analysis.
In a general sector downturn, it makes sense to also take a look at the asset values. Some numbers have a strong quantitative underpinning and are both easy and rather certain to value.
Other parts are what makes NVO so very difficult to value: Option values from the massive number of targets, some 28 and counting, value estimates are in some cases pure uncertainty, whereas in other cases better underpinned by quantitative data. It cannot be accurately quantified however, numbers not only can but will be wrong in both directions. This is life, when assessing option values, expect a lot of "wrong" estimates for lack of data. We are dealing with known unknowns. (Option value refers here to the value of having the option (the potential upside if all goes well, multiplied by the estimated probability of success, less the current book value of said asset to avoid double counting assets).
As an example: If the intrusives at Egina awards NVO with a resource like De Greys, it would have a market cap value of approx. 1.5 billion as is seen at De Grey. I use an 8% probability of achieving this outcome, which would quadruple NVOs market value, but I value the option at only 120 million for now. The use of 8% and not say 5% or 15%, does not have a quantitative underpinning, it is a guesstimate. Please treat it as no more than that, in order to not over-interpret option values.
In another example I use a 4% probability of replicating Fosterville on the land adjacent to Fosterville, which is the most prospective land there, factoring in also the JV agreement. Do you think the chance is much higher???? Then simply adjust upwards the value of the option.
Cash 52,0 mill.
PEA @ 1900 319,0 mill. (BC, July has proven up the PEA, 1900 will be with us very shortly).
New Found Gold stake 129,1 mill.
Elementum 3D, 12% stake 16,6 mill. (Raise at)
Calidus 7,5 mill.
Kalamazoo 3,3 mill.
GBM 1,2 mill.
GBM warrants/options 0,3 mill.
14,000 km2 Pilbara 166,3 mill. (Acquisition and development value held on the balance sheet LESS BC assets tranferred to mining development assets)
BC and MoY targets
Option, BC LOM expans. 160,0 mill. (Doubling LOM worth 320 million in this model. Virtually certain to succeed. RC drilling/Chrysos leads to massive data, increase 43-101 ounces, high prob., 50% ascribed)
Option, Beatons extension 4,0 mill.
Option, SKyfall 4,0 mill.
Option, Au81 4,0 mill.
Option, Genne 4,0 mill.
Option, Margies 4,0 mill.
Option, Bartons 4,0 mill.
Option, Cutlass 4,0 mill.
Option, Parnell 4,0 mill.
Option, Sayshell 4,0 mill.
East Pilbara
Option, Virgin Creek 8,0 mill.
Option, Contact Creek 8,0 mill.
Option, Talga Talga 75,0 mill. (150 million rough estimate, Very high grades seen, good exising infrastructure, 3km mineralization, trucking distance mill, 50% prob. of production)
Option, Strattons 4,0 mill.
Option, Salvation well 4,0 mill.
Option, Elsie 4,0 mill.
Greater Egina area
Option, Intrusive(Hemi) 120,0 mill. (Basement tgts. 1,5 billion mcap potential, with DeGreys drilling success close by, we model an 8% chance of replicating)
Option, Egina 30,0 mill. (Gold has been ascertained. Permissions and extraction methods, agreements yet to be done. Hence a very small prob. used for now )
Option, Greylin/Boulder 4,0 mill.
Option, Sandy Creek 4,0 mill.
Option, Paradise 4,0 mill.
Option, DeGrey surface 4,0 mill.
Greater Karratha area
Option, Comet Well 12,0 mill. (Unknowns. Better data could improve visibility. Rough estimate of value in excess of book value of the asset).
Option, Purdys reward 10,0 mill. (Unknowns. Better data could improve visibility. Rough estimate of value in excess of book value of the asset).
Option, 47K 10,0 mill.
Option, Bobs Well 4,0 mill.
Victoria area
Option, Malmsbury 80,0 mill. (2 billion mcap potential, with QHs Fosterville type knowhow x2, no findings as of yet, we model a 4% prob. of replicating)
Option, Wits 2.0 thesis ? (No estimate attempted, Is there gold all over the place in the Pilbara???? - maybe. The upside of this is unknown and impossible to estimate)
Option, Pilbara basement ? (No estimate attempted, Is there gold at debt in the Pilbara??? It has scarcely been drilltested).
Option, oresorting success ? (No estimate attempted - potential massive upside)
Option, rise in gold price ? (No estimate attempted - likely to occur in coming 6 months)
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Assets 1276,30 mill. CAD
Less total liabilities 126,9 mill.
Net value 1149,40 mill. or per share 4,70 CAD
This is a sum of parts valuation. In the very moment new targets are proven economic, new ounces discovered, the valuation would increase significantly. The option values listed are not the value in case of success, but rather an implied worth of the option for giving it a shot, at this point where success is yet an unknown.
It stands to reason that the 14,000 sqm could have a high two-digit billion final value depending upon outcomes of current and not least future projects. However, at this point we have to be much, much more conservative in attempting a valuation, simply for lack of data.
It should be noted that when NVO started to acquire land, there were scarcely gold producers in the Pilbara. They have since mushroomed, projects have been advanced, and gold prices have nearly doubled. This implies significant value increases relative to the book value of land holdings, increased liquidity of gold projects.
As more information becomes available the value estimates can be improved upon.
This is not investment advice. DYODD.