Listened to the Wheaton River CC last night. This made me curious to compare WRM and NGX:
Info from companies
NGX:
Kemess South produces 260k oz @ cash cost of (say) $177.
They paid $180m for the whole of Kemess = $44 per oz.
Kemess South now has 3m oz proven reserves.
Before recent equity placement, had LT debt of $103m
Now have 130m shares fully diluted.
Kemess North: inferred resource = 5.7m oz.
Cash flow per share in 2001: $0.09
WRM:
Luismin produces 183k oz @ cash cost of $195
(they say this will move to 250k oz @ < $170)
They are buying Luismin for $75 m.
They have proven reserves of 860,000 gold equivalent oz
They had $20m cash before purchasing Luismin.
Resources = 3.8 m Aueo (of which 41% is gold)
Fully diluted, they will have 150 m shares.
They are predicting cash flow in the range of 12c this year, and up to 25c by 2005.
My calculations:
WRM paid $87 per oz of reserves
Assuming 80% conversion rate (quoted historical), they will have a total reserve of 3.9 m Auoe
Assuming the same conversion rate at Kemess (for no very good reason), NGX would have 7.56 m oz of gold (real gold).
Yesterday's closing prices: WRM C$ 1.11 NGX C$ 1.80
In USD: WRM $0.71 NGX $1.15
Mkt cap (fully diluted): WRM $106.5m NGX $149.5m
LT debt: WRM $40m?? (not clear about this) NGX $100m (but have just received $90m cash from equity financing).
So let's say: EV WRM $146.5m NGX $159.5m
WRM = $39 per oz of reserves/resources
NGX = $21 per oz of reserves/resources
Disclaimer:
I know nothing about valuing mines, i am just improvising. Some of these figures may be wrong, and no allowance is made for any of the crucial 'qualitative' factors which may affect future profitability or recovery rates from these deposits.
Tentative conclusion: If I am more or less right in calculating EV, and if NGX can convert Kemess North at those kinds of rate, then it seems to me NGX is very undervalued relative to WRM.
But if WRM has less debt than i assume, or NGX has a whole lot more, and if WRM is dealing with substantially easier/more 'reliable' geology than NGX, then its ozs might be more valuable, and so the gap between them might close somewhat.
(Also depends whether you would rather have silver as Aue ozs, or copper as by-product, I guess!)
Am I at all on the right track here? All constructive criticism (however cutting) gratefully received!
peter |
