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The inexperience is real, and I think PC is a prospector geologist rather than a corporate manager. That's why I expect him to go for a sale.
Do we have some historical examples around simillar companies so we can work out what the sale price of assets this valuable to a more experienced 'production' company might be ?
Sheldrake, yes you would hope that once a revenue stream is established that sres could develop other projects and the 5% dividend yield can be maintained indefinitely. This is why the likes of Rio Tinto's MCAP can be calculated on dividend yield because it assumed that it can be maintained as they develop other projects. However, sres has no experience in bringing projects to production so there would be a big discount due to their inexperience.
Taking my logic further. If you buy the mine in isolation and want a 5% annual return plus return of capital. Then you want 27x5% + 100% = 235% total return.
300m profit / 235% = £127.5M mcap?
If he can sell it for 1p I'd be pleasantly surprised.
I think you're right, my valuation is based on the value of the profit to somebody who gets in at the beginning of production. The value goes down as the resource is depleted. I would hope that the company invested in other sites, and had some success over that time, but if we model this based purely on the value of the minerals, I think it's like a 27 year leasehold with a healthy rental return.
I think shares in issue will at least double with raising cash for various things.
I'm not sure that Sheldrake's calculations stack up because they don't take into account the fact that the mine is a finite resource.
In his example, let's pretend that someone buys the whole company for £220m and runs the CS project in isolation. Ignore all other projects. At the end of the 27 years, apart from machinery, there is no value to the business because the resource has been depleted. So the investor does not get his £220m capital investment back. Over 27 years, return on investment is, therefore, only £80m. A 36% return over 27 years isn't good.
I think MCAP needs to be discounted to allow for this.
What are people's thoughts on my logic?
6p and i'm disappearing off into the sunset never to be seen or heard of again......please let it be so....pretty please!!
I will be bathing in champagne every day at that SP level rather than the current quick shower to save the water!...
Let's hope.......
Morning Sheldrake.
Thanks for the numbers. Who you are isn’t particularly important to me, you’ve had a stab at producing some numbers something, understandably, not many feel comfortable doing. It’s not an easy task unless you’re well versed in the sector. I posted a while ago that in my view the company is worth pennies rather than a fraction of one, when some were under valuing the companies prospects below 1p. I broadly support your view and believe the reality is somewhere between 3p and 6p with what we know now. This doesn’t take into account the company’s other assets, which have yet to be developed. We will soon know the answer to the conundrum which is exercising us all after the company committed recently to providing shareholders with value information in the near future supported, no doubt, by the commercial discussions which are taking place. I also believe the company will be an acquisition target, if it isn’t already.
Very chunky numbers. I would be chuffed with the lowest predictions
So ignoring the personal beefs what are the opinions on his calculations?
I've heard of two prus. You just confusedly banged on about your prudential dividends not being in a list that was obviously labelled 'mining company dividends'.
I think you have been enjoying a drink tonight, sir.
Your a dude who used to invest in tracker funds and never heard of pru. Doesn't say much for you. You've tripped yourself up.
No! it's just a case of mistaken identity....You carry on Chim...errr.... I mean Sheldrake
"These are not average mining companies,"
See the pru you're talking about isn't a mining company. thats why its dividend wasn't in the list
I thought you were talking about the mining company with ticker symbol PRU, rodster.
I assumed you were talking about a mining company because all the dividends I posted were from mining companies, to see what is normal in the sector. The Prudential's dividend yield is 2.94%
Why do you think I'm somebody from this other board?
Our '£10k in summer 2020' investor would've bought at around 0.15. If their stock gets to 6p then they've turned 10k into 400k in capital and they're possibly getting dividends each year more than their original stake.
Will this happen? Probably not. I don't think PC is interested in actually managing loads of mineworkers. He'll sell it for less than 6p. What would the discount be?
Lets say SR would be somewhere a little above the middle - they'd invest to try and grow, but they'd have to pay a risk premium.
5% sound fair?
If the other values were right, then in full production after all the licensing, permit and deal risks had been hurdled, and the team had proved they could operate this succesfully, then 5% dividend on 300 million of value would mean the company had to be worth 44 times what it was worth when it's market cap was 5 million. It would need to be 220 million. What share price does that represent?
If the outstanding shares remained the same, we're looking at about 6.6 p. Knock some off for raising extra capital, mistakes and hiccups, add some if the value of the minerals goes up over time. Obv this is only a vague ballpark; 6p a share once it's proven it can get into full production.
What are the dividend yields of normal profitable mining companies?
These are not average mining companies, these are some of the strongest dividend yields available in mining: -
Name Forecast Yield %
EVRAZ 8
BHP 6.4
Rio Tinto 5.4
Polymetal International 5.4
Centamin 5.2
Anglo American 4.2
Ferrexpo 3.8
Antofagasta 2.9
Fresnillo 2.6
Hochschild Mining 1.8
In the strange world where Sunrise has a billion dollars of minerals to sell and all the needed permits but its market cap remains relatively tiny because people remain paranoid about past failures, risks etc.. then the dividend yield would be huge.
1 billion in minerals * 30% profit margin is 300 million.
Somebody who bought £10k of shares when the company's market cap was 5 million would own about 0.2% of the company. If they get 0.2% of 300 million in dividends over the years then that's 600 grand (or 22k a year over the 27 years). (everything at today's nominal prices obv).
Clearly this is a nuts scenario. Nobody buys 10k worth of shares and then gets a dividend yield of 220% for the next 27 years.