The gold and silver streaming business model is a good one, but I'm not clear if the streamers deserve a higher EV / 2012 revenue valuation multiple than than other profitable gold miners, or for that matter higher valuation multiples than AAPL or GOOG.
I'd like to see SSL.v / SAND valuations compared to their invested companies on a EV /net asset value (NAV). Using Collossus Minerales CSI.to as an example, which company increases their NAV the most, when CSI.to increase their reserves of gold in the ground. On a return on investment (ROI), the article I posted makes a clear point that SAND increases their ROI exponentially (3X , 5X) when Colossus increases their NAV within the stream contract - field of gold. I'd guess on a percentage basis, the valuation (EV) of Collossus increases more than the 17% net to SAND increases on percentage basis.
I looked at Gran Colombia Gold CGM.to presentation where CGM notes GCM.to is valued at 15% of NAV, but GCM has a fari amount of long term debt and consolidated cash costs are $1,313 / oz verse a $1,650 / oz gold sales price. GCM.to is not profitable with $1,313 / oz in cost, so you can't apply the same EV / revenue multiple to that of a company with a high profit margin. High profit margins are typically associated with tech stocks, or oil and gold stocks as commodity prices rise. If gold stays above $1,750 GCM is profitable, at $1,650 / oz, GCM's is not profitable. A net-net-net profit of $100 / oz equates to a profit margin of only 5% of gross revenue ($100 / $1,750).
I'll have to review SAND's Q2 2012 and Q3 2012 profit margin. The other valuation metric that SAND uses that's a bit off, is they use 2015 revenue to establish the 2012 valuation metrics. The rest of the stock market establishes current 2012 valuations as a weighted average (50% - 50%) of trailing 2012 financial's and one year forward 2013 estimated financial's. With producers that bank NAV from resources / gold / oil in the ground, is consideration for the NAV of the proven gold reserves. |
