I'd like to renew the FN vs. EN value debate
As I said yesterday, TMAN, I believe that your post #378 was one of the best posts on this thread. However, on re-reading it again (and again and again), I think I disagree that Midas will benefit EN more than FN. It will clearly benefit FN more, because FN has fewer shares outstanding.
Here. At 250,000 ozs. of gold production per year, Midas provides both FN and EN 125,000 ozs. of revenues (obviously). At $US300 gold, the revenues for both, over a year's time, is $37,500,000. Take away total costs of $120/oz, and you have profit to both EN and FN of $22,500,000. Divide this figure by EN's roughly 100mm shares outstanding (let's forget warrants for now) and you have earnings per share--before tax--of $0.225. Divide that same profit by FN's roughly 80mm shares outstanding, and you get a before tax profit per share of $0.281--25% better!
As I see it, EN has (or soon will have) three big sources of revenue: Meikle, Midas, and Turquoise Ridge. FN has three currently: Goldstrike/Betze Post, Stillwater, and Midas. In addition, FN has a fantastic 9.25% NPI in the huge Voisey's Bay find, and 9.6% of Aber common stock, which holds a 40% interest in the Diavik Diamonds Project, which FN describes as a "long life, world class mining asset, with 80% profit margins." Their intention is to turn this holding into a royalty of some sort, in the future. Also, Stillwater will be tripling its output in the next three years, but even then they now have enough resources for the mine to last for 50(!) years. FN also owns a hefty NPI on solid platinum ground in S.A., for the future.
Just because EN is only gold, too, doesn't mean that FN is a slacker in that area. On the contrary, as TMAN says, "beyond Midas, FN has more "potential" world class exploration deals working, mainly in Canada, independent of EN, than EN does independent of FN anywhere."
I know that each royalty for each company is different, but for these two companies to be considered equal in value means that the cumulative value of EN's holdings/royalties better be 25% better than FN's. And I just don't see that. If anything, I see it the other way around. FN already has three outstanding, growing and producing assets, and more on the way. They already control outstanding future royalties. Both companies hold a lot of working capital (although FN has $C22mm more in working capital, even after EN's January offering), so acquisitions are possible/probable for both.
I think FN's recent share price dip below EN's was an aberration, and, if it repeats, I'll be a buyer of FN again.
Is this enough to renew the debate? :-)
Fergie |
