Questions on the valuation of DEZ. I ran some numbers this w/e and here's what I see. [Using Fleckenstein Method]
Data taken from 2004 Annual Report.
Jacobina Mine
Proven & Probable Reserves: 980,000 oz Au
Total Value @ $420/ oz: $411,600,000
Total Shares fully dilluted: 111,737,025
Estimated cash costs/ oz: $200
Estimated non-cash costs/oz: $ 82.66
[18 mo expenses (8.2MM)/est annual production, 100K oz.]
Total costs/ oz.: $282.66
Total Cost Prove & Prob: $277,006,800
Net Value,Proven & Probable: $134,593,200
[Total Value - Total Cost]
Shareowner value/ share: $1.20
Now if I run the calculation with the 'Measured & Indicated' figure of 2,050,000 oz Au.....I get a share price of $2.52.
But then one can add in the Joao Belo portion
Joao Belo
Proven & Probable Reserves: 727,000 oz Au
Total Value @ $420/ oz: $305,340,000
Net Value: $99,846,000
[ Total Value less Total cost of 282/oz.]
Additional Shareowner value: $0.8936
This gives a fair market price for the stock of $2.09
Now if I use the 'Measured & Indicated' figure for Joao Belo I get and additional shareowner value of $1.19 for a total share price of $3.71! [Measure & Indicated, Jacobina + Joao Belo, 2.52 + 1.19]
This analysis covers only two plays, while the company reports additional nearby prospects at Morro Do Vento, Canavieras, Pindobacu. It would seem that these properties ought to add some additional value, but appear to be fully discounted.
Now the questions....
1. Is this a 'correct' or rationale method for estimating share price? What changes/adjustment should be made?
2. Does NPV figure into the calculation?
3. Assuming correct methodology, and no NPV application, then why are the shares trading so cheaply, especially as the POG increases?
H3
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