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Gold/Mining/Energy : Winspear Resources -- Ignore unavailable to you. Want to Upgrade?

To: Confluence who wrote (23628)	7/27/1999 3:21:00 AM
From: russet	Respond to of 26850

Hi Confluence, A hamsters discussion of your points, I don't (think) taxes should be an issue for many years, because the exploration and development expenses will allow for tax-loss carry-forwards for quite some time. I have ignored taxes, but there is an allowance to pay off principle and interest to the banks over 10 years for capital costs incurred. I think that is legit. A company with huge debt is not valued the same as a company with no debt. The other issue is the NPV of these future earnings. While I don't know how the future should be discounted, it seems that most analysts do, and thusly they would reduce these numbers (like on ABZ) to bring them into the present. Yes,...Engineers believe in NPV's. Analysts say they do but I think the stock market looks one or two years in the future at most and this quarters results are important, but the market hangs on the next 6 months. As long as the production is expected to continue for many years, the market only cares about the next quarter or two. The other issue is timing of production. When? How fast can stuff be taken out of the ground profitably? This is very important, as an extra year or two could explain a 10-20% discount This is contained in the market multiple. Are you suggesting I use a lower one to discount this? I think SUF's is appropriate. The market has refused to recognize most of SUF's soon to be producing in the next 2-3 years assets as well. I think that cash flow might be the real target of analysts, and I believe that these numbers might be nicely higher than yours, with a similar multiple. Current philosophy seems to center on EBITDA,... Earning before interest and taxes and depreciation. Analysts say they look at this, but in reality they lie. You have to account for how much debt a company has which reflects the capital costs to produce the goods,...therefore you must include interest and principle payments. Depreciation is a good approximation of this (Principle and interest payments in my calculation), so I would take these off lowering the cash flow numbers to earnings. I agree taxes will not be a problem for the first few years, which is all the analysts will focus on, so I have ignored them. In conclusion, I will stick with my $1.83, unless Winspear can come up with some production increases, or someone can prove my calculations are in error. russett, just another hamster.