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Gold/Mining/Energy : Trump's 12 Diamond Picks, Discussions Limited -- Ignore unavailable to you. Want to Upgrade?

To: Tomato who wrote (1375)	10/17/1998 10:25:00 AM
From: George J. Tromp	Read Replies (1) \| Respond to of 2251

I think it makes more sense to do a detailed cash flow analysis., in the end earnings is what drives ultimate value. NPV is a method of ascribing value today to a fluid changing market place., and means little sense is subscribing values that far out in the future to present conditions., a quick comparision of the strength of those numbers., Diavik has a 1.5 year payback with an Internal rate of return of around 36%., Winspear should exhibit around a payback of 1 year and a Internal rate of return of 55%. Just this crude comparision shows the strenght of the overal project in comparision to potential cash flows for the life of the mine. First Tomater., the discount rate Maintenance is referring to is the discount rate that analysts use to ascribe values to stocks., 2%., 5%., 10%., etc. If one assumes the MRDI scoping study is accurate., but in reality feasibility studies will pinpoint the dynamics of the project. NPV is a nebulous term at best used to describe present value in a fluid changing market place, I prefer to use cash multiples and PE ratios in estimating future prices., so analysts will use cash flow numbers and earnings to determine price ranges. Aber had been compared on several occasions to Diamet because of similiar cash flows and and earning projections., one subtle point many left out is the initial payback period that Diamet owes BHP which will affect earnings for the first 3 years., if I recall correctly. If one assumes multiples of 15 for earnings and multiples of 12 for cash flow., then if Winspear over the course of the mine life based on 3.5Mil tons of kimberlite using the MRDI model generating those numbers of of approx 272mil over the course of mine life amoritized over 10 yrs would be around 27 Mil in potential operating profits on a yearly basis., if one assumes that the stock should trade at a multiple of 12 times cash flow., or 15 times earning then one would see around 27Mil x .6775 = 18Mil operating profit x. 64conversation or about 11Mil US or around .30US net profit per share or around 4.50US per share or approx 6.30C. Those numbers may be influenced by PE multiples the best thing to do would be to analyze diamet and compare earning multiples. The more tonnage one delineates., the better the numbers for long term price appreciation on a relative basis. These figures are rough at best and should be used as a potential guideline going forward relative to industry PE ratios. Whether the earnings develop in that manner depends on the accuracy of the feasibility study. Numbers which I dont see at this time are royalty fees., marketing costs., nor reclamation fees and cost of capital. Hope this helps Tomater., but NPV doesnt mean much in this enviroment., earnings and cash flow drives stock prices in this arena. Of comfort however is the exceptional rate of return (IRR) Abers project is considered very good on a cash flow basis showing around 36 IRR and suspect Winspears 55% will offer the dynamics for a prosperous mining venture. But caution is the word until more information is released., concerning drilling and firming up tonnage in I think the corporate tax rate is 45% in the NWT., not 60%., and one should figure around 2% for royalty fees., 1% for reclamation costs., and 5% for marketing costs of diamonds., those numbers being taken off gross revenues., split percentage wise between participants. Sincerely George J. Tromp