Working out a price:
That base NPR is just from the 1st of the 15 diamondiferous pipes. It is also very under-rated right now, as a producing diamond mine in Canada should have a market cap of at least $1 Billion. Granted, there is still 10 to 14 months to production, but they are still a far cry from that $1B MC.
That base value also, does not take into account the increase of about 15% in rough diamonds the past 6-12 months, nor, as mentioned before, any of the other properties, just the JD-1 pipe.
If you compare NPR and try to divide that by shares, you will not get an accurate market value. That is not how analysts or the market look at a stock I've been told, when placing a value on it. Granted, there is still spec from the 14 pipes that have not been valuated yet, but they have been confirmed to hold diamonds, and the Revenue from the 1st should be over $820 Million based upon the history of the other 2 diamond mines in Canada, and their initial vs. production numbers. We all know the accountants initially undervalue the NPR by a good amount right off the bat, just to justify the capital expenditures.
I read that Zacks(sp?) uses about a 16.7x factoring number, (although I've read recently many use a 20xEPS factor for diamond mining) multiplied by the annual EPS when projecting a share price.
If you take that minimum base of 142MM divided by the outstanding shares, and multiply by 16.7 or 20, divide by the projected mine life in years, you would get a base share price (if they only had that one pipe) of over .49.
Not counting the other 2 mines they appear to be looking into.
However, the pipe life (if they go with the new pit design announced a couple months ago), that would give the shares a value of 0.92 from the 1st pipe as they double the throughput, and again, there are still 2 other mining locations they appear to be doing environmental studies for.
Now, after factoring the other 14 pipes, and the tons of other property they have found diamonds on right beside the mine claims, you should get a much higher number. $10+ long term? (5 years+ at the diamond mining pace)
Also, factoring in the agreement they have with Tiffany's that was signed for 20 or 25 years would definitely lead one to believe that the 9 year mine life (or 4 years with the doubled plant size?) is just the tip of the iceberg as they've planned it.
I can see at least $2-$3 by this December if not higher.
The mine is paid for with cash, and although you have to be very patient investing in diamonds, as they move very slow and secretively these companies, it sure pays off big when they finally go!
Just ask the folks that bought ABER at .52 in the 90's and sold for $52 last year! It was a long haul, but 6-8 years of patience on a $20,000 investment would provide an early $2 Million for retirement.
Just my thoughts from my own due diligence. |
