Majestic Gold Corp. V.MJS

Very Few Gold Stocks on HKEX

[nozzpack]

I perused through over 1500 listings and found just 4 gold stocks of which just two were producing, the other two exploration companies .

Shandong has already been indentifued and it trades at a very high multiple.

The other gold stoc...Touruan Gold..had a market cap of Approx $275 million US, and 3.4 billion shares so .trading at about 8 cents US..about 10 cents per share...and modest net debt

It was trading at 39.6 times net earnings which would make its net earnings about 0.25  cents per share
I recall MJS earning about 1.3 cents per share in 2022 which would be equivalent to a share price of about 5 cents cad per share.

MJS owns 9.4 b shares , so if Persistence traded at TG's multiple, our investment in Persistence would be worth over $450 m cad

[nozzpack]

I think I got the name of Touruan Gold a bit FF..up but you can view its financial statement below and in particular it's net cash flows of about 134 million HKD which is about $18.5 m USD. It therefore trades at about 15 times its 2022 net cash flows ( 2 b market cap / 134 m ). As it happens, MJS had net cash flows of $17.8 million US in 2022....( $10.4 m + $7.4 million in Govt bonds

[DetVicMackey]

Your relative valuation is still conservative as you didn't even factor in other financial metrics. For example, Majestic operates with substantially higher operating margins and also has a much better balance sheet. Majestic continues to increase its working capital position organically whereas Tongguan has had a deteriorating working capital position while relying on  external financing

[nozzpack]

You are correct on all points. I also did not include the gains in production or reductions in cash costs going forward which will considerably increae cash flows versus 2022 which was the hind cast valuation.. Considering all financial metrics going forward, $600 million CAD would be close to fair value.