Hello russett (most wry of all potatoes),
The issue of calculating SUF's worth isn't going to matter for a while. The trading of shares is very much unlike what is going on in most other markets (save maybe CNB, SWG). This goes to liquidity and demand, and here are my thoughts:
Since the games played by First Marathon over the past several months (making the stock look bad by offering size, then crossing blocks under the fair market), many larger sellers have likely been spooked. Witness the reaction of the panicked seller on Thursdays news (platinum). Stock opens, trades a few shares, and then wham!, nervous nellie, seeing lower bids, thinking he must sell into news, hammers the stock down to $4.91 over the next half hour.
As people become aware of the good news, and ner. nellie GOES AWAY, the stock trades back up to $5.65, on relatively decent, but not heavy volume. Then, towards the end of the day, more large stock comes in to close it at $5.50. Somebody has shares to sell. Friday am, the same thing, a seemingly inexhaustible supply, this time thru a different house. One thing to note, both Action Direct and Latimer do jitney work for foreign brokers. This certainly didn't look like Canadian selling.
So the stock may sit at $5.50 until enough demand is found to overcome the supply. This could happen quickly as analysts review the platinum deal over the weekend and issue reports (BTW first one I saw was from Yorkton - upped to Strong BUY, $9.50 target,with more reveiw to come), or it could take a long time at recent regular volumes, or it could be gone in a day with a NWT discovery.
While I'm very frustrated by the share price and its trading patterns, SUF has done a great job building the fundamentals. If we step back to review, since the settlement at Marsfontein, SUF has reported excellent numbers for it initial production, has increased the likelihood of further economic discovery at each of its exploration properties, has established new exploration potential, and has secured the reasonable potential that cash flow and earnings will remain long term.
Whenever these sellers are gone, and most of the selling has come from seeming large, impatient sources, then the true fundamental value will begin to be reflected. We just need volume.
And the fundamental value is high. Some thoughts on the platinum deal:
-Stillwater, with a market cap of greater than $1.2billion Canadian, expects to produce 1,200,000 ozs PGM in 2001, at higher cash costs. Conveniently, this is 10x SUF plan, so it seems reasonable to add $80-120million market cap for SUF.
-If simple cash flow is net earnings with taxes added back in, then $0.90/share earnings imply $1.23 in cash flow (and these are the low side estimates from SUF)
-One mining report I read said that a long term deposit (platinum) should support a cash flow multiple of 10x,
Add to this SUF's Klipspringer and Marsfontein production, exploration upside at same, the NWT hopes, the Angolan investment, the new Brazilian potential, plus the future efforts of the folks at SUF, and I can see much higher numbers down the line.
Unfortunately, the analysts, by and large, discount RSA operations, and will not assign even potential value to NWT, Angola or Brazil. Thats fine, we have growing fundamental value
Regards,
Confluence |
