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Everyone aboard? Eggsellent.
DCF is way too sensitive to assumptions about interest rates. In situations like this I take the view that the increase in the commodity price less tax is going to go pretty much, straight to the bottom line. As the results of increased commodity price is cumulative over the course of the year, the effect can catch the market unawares. Anyway, it worked for me a couple of years back with Griffin Mining when the price of Zinc was rising steadily.
Craig, it's been the case for 10 years here that selling AND buying has always been slightly skewed for anything over 50k shares at a time. The trades tell a different story. Every day this week has seen more buys than sells.
Sorry Stoodio,
I'm not sure I agree with your statement about constant buying pressure, I've not bee able to get a quote to sell all day on HL, only 69000 share, this tells me their is constant selling pressure and not enough demand to absorb it.
Hence we are down so far from the 134 high this week,
https://menafn.com/1101736114/China-Car-sales-increase-3648-percent&source=30
https://financialpost.com/pmn/business-pmn/more-platinum-deficits-to-come-after-record-undersupply-in-2020-wpic
https://uk.investing.com/analysis/chart-of-the-day-part-2-hedging-inflation-with-platinum-200462535
10% retracement over 2 days with constant buying pressure; buys now outweighing sells by 3:1 over the 2 days with the majority being picked up in £50-60k blocks :)
https://www.cpmgroup.com/rhodium-backs-off-30000-oz-supply-concerns-still-main-issue/
Don't look a gift horse in the mouth :)
Thank you Mr Market, thank you!
I love pullbacks on great businesses. Love it when the finance sector throws a sale! Don't you?
She's always so polite when in the ascendancy :) She never stops giving. Tickling us, then pulling back to pick up any stray passengers that may have missed the bus :)
Volume tells you all you need to know all week. Buys outstripping sells 2:1, but pulls back as a goodwill gesture to allow the slow ones to buy in :)
What's not to like?
I'm a buyer ;)
Temporarily off its highs, yet still absolutely bringing home the cheese :)
The sell down from Africa Asia has been bought into quite heavily. Expected pull back off the £1.32 high of this / last week and hopefully some decent consolidation no lower then the £1.25 mark before the next huge step up which i'm expecting to take us into the high £1.30s, low £1.40 within the next 4 weeks :)
Nothing to see here. Smoke weed and eat pancakes.
:)
Thanks - interesting. From what I read in MI, they have the rights to current and historic tailings dumps of the 6 sites, and the Momentum Investor piece states these locations have a remaining life of 7-10 years. You are correct that Semancor is a major operator with numerous other sites, but there is indeed no visibility of future additional contracts. Ultimately, if they cant obtain new sources, then this is a run off play of these locations, which would explain a relatively low apparent multiple (though a large part of the multiple being so low are the eye watering price levels their PGM content has reached - if these arent maintained and there is a reversion to pre 2020 price levels, then the multiples wont look so low) . They have indeed upgraded their recovery tech, reducing talings volume used by 20-30% on half their sites, so that helps but ultimately means there is a finite volume of tailings to be processed.
Hi JonnyGee. Not sure where that info came from but the 7-10 years life relates to the tailings dumps which SLP has the rights to, not the Samancor mines. The mines themselves have pretty extended life, the seam is huge, but given its Samancor we don't have clarity on their future intentions. Therein lies the risk. The dumps run out and then SLP has to rely on current arisings. But Samancor is one of the largest suppliers of seaborne chrome and ferrochrome. There's no way they wont be mining chrome in 10 years.
The dumps make up a large portion of the material processed. I cant remember how much but its more than 50%. So after the dumps run out SLP could be looking at significantly reduced production. Then again, in 7 years time there might be an Echo 2 or3 meaning that those dumps can be economically processed again and again. I think in the most recent presentation they mentioned that they may have found a way to extend the dumps' life already. Given advances in tech and the impact on recovery the life of the dumps could indeed extend beyond the finite stated life
I have "Security Analysis" on my bed-side table (one day I might finish it)! which page(s) is this set out?
Not sure that is what these legends of value investing thought. The point is simply surely that you cannot take a risk-free rate derived from a long term (say 10 yr) sovereign bond and use that to value equities. The two are completely chalk and cheese. Equities (obviously) carry much, much more risk than bonds. The risk free rate (sovereign bonds) is added to the Equity Risk Premium (depending upon the risk profile - Venezuelan IT start ups = 25%, FTSE blue chip = 6%) to give a cost of equity.
If there is debt, you bring in the cost of debt and put the two together to form the cost of capital which is your discount rate back to NPV
One can also use a price multiple.
But I don`t know of any method which uses a risk free rate to value equities without adding in some form of ERP.
Anyway, what works for you works... so that is all that matters!
S
Thanks for the tips. Price of course spiked on Monday before I could sort this out but hopefully there will be a few bumps down like today. I do however have another more fundamental question on SLP which you guys who are obviously tracking it more may be able to answer. I came across them reading The Momentum Investor coverage which was positive plus the IC piece. One thing that does concern me though is the very finite tailings supply they have with the 6 Semancor sites only having a remaining profitable life of 7-10 years . No visibility on additional site agreements with Semancor and with the metal prices going where they are there is a significant risk of miners keeping this to themselves. Any of you guys have some gen new supply sources - comments from the company on this?
Hi Sirius
I am not using a DCF for my personal investment decisions. The method I employed (for decades) is from Benjamin Graham (and David Dodd).
Graham thought that since the investor had the choice between purchasing common stocks or bonds, it was appropriate to take into account the rate of interest paid on a high-grade bond - 4.6% in this case- in determining the intrinsic value of a stock.
That's where the 4.6% come from.
Great rise today and special thanks to Klaus Schwab without whose meddling this wouldn't be happening.
2021 will be the year when every major government, as well as broad private-sector coalitions, commit to a “net-zero” target for greenhouse-gas (GHG) emissions. This means that, rather being stuck in a race to the bottom and fearing a continuous “free-rider” problem, the world can benefit from a virtuous cycle of decarbonization.
With the added knock on effect to catalytic converters and emission controls which we here are thankful for.
Afterburners been lit :)
Bazzaman's comment about the delay is I believe behind today's sudden interest and with results due in 6-7 weeks hopefully this is the beginning of the march to 150+
I was hoping for a crash, not for a sudden appreciation... darn.
131?
" I'm enjoying the slow appreciation journey.."
Slow???
- Spoke too soon?
LN:
You seem to be discounting eps at the risk free rate of 4.6%? Is that your cost of capital?
What Equity Risk Premium are you using, given this is: (1) mining; and (2) South Africa?
Others on here use a discount rate nearer to 20% IIRC
Fair value at c. 3% growth from year 3 (15%, 10% years 1 and 2) = low to mid 200s on those inputs. I see she has broken the upside of that rising wedge: https://www.tradingview.com/x/g9klEvEr/
Happy days :)
S
Hi Velo,
I don't use a DCF approach either. It's Graham and Dodd's formula (which I made a bit more pessimistic even). Very simple and a litmus test that served me well for decades... Ironically, a lot of DCF calculations often arrive in similar ballparks.
I do like the P/E comparision with industry averages. Also, nice and simple and ought to be totally sufficient for our puproses.
I'll give that a go as well :) Cheers!
I dislike using the discounted cashflow version of calculating SP's because of estimating future interest rates et al, but do enjoy seeing others valuations of SLP. For instance Simply Wall Street site's discounted cashflow value is coming up with the 470's for SLP.
My very simple PE ratio comparison of industry averages v SLP comes out higher in the 270's as it's true value right now without a premium rating added for future growth.
And Stoodio has posted he's working on a bunch of valuations, but whoever, whatever, it's all coming out at much of a muchness whatever calc is used
- as the consensus is that the current market SP valuation currently under-estimates SLP's 'fair' value.
I'm enjoying the slow appreciation journey towards true and fair value.