RE: RNS18 Dec 2023 07:56
A good post on HotCopper comparing ADT with BGL who have just gone into gold production
I am notsure what made me do the comparison below but the more I looked at BGL and ADTthe greater the similarities, but they have very different valuations as decidedby the share market. ADT and BGL have a lot in common including financials, characteristicsof mine and risks with some differences (e.g. different metals).
Thecomparison below looks at ADT’s valuation from a different perspective but Iarrive at the same conclusion ie ADT is very undervalued and has potential upsideof upwards of 3 times current share price and potentially more.
The comparisonbelow is based on publicly available information and in particular ADT’s DFS fromAugust 2021 and BGL’s FS from September 2021 and updated FS in June 2022. Some informationwas not included in the last BGL FS (e.g. NPV etc) but I have been able to drawcomparisons using the September 2021 FS.
I have adjustedthe figures in the FSs for the latest metal prices which for ADT reduce revenueby 7% and increase them about 20% for BGL. I have not allowed for hedging whichwill probably make little difference to ADT but will reduce BGLs cash flowbased on current metal prices (have not checked what hedging each has in placeif CC any).
Thesimilarities, both:
- underground mines
- high grade resources
- very high margins with ASIC about one-third ofrevenue (using latest metal prices)
- have a 10-year mine life
- have excellent prospects to significantly expand resources
- will be in production at a similar time with BGL a few months further progressedthan ADT (maybe about 3 months)
- are exposed to similar risks regarding future operational costs, minedmetal grades, metal prices and commissioning issues
- Total net cash flow after tax over the 10-yearmine life is very similar and an NPV which looks similar in size (see detailsbelow)
- ADT payback period is about 7 months while BGL is about 1 year
Differencesinclude:
- ADT has nearly doubled resources since DFS andwill probably double mine life (but not included in metrics allowed for inmetrics below)
- country risk with Bosnia not known for mining vs WA best in world
- different metals but ADT has about half revenue from precious metals sonot as big a difference as one may think.
- ADT has an additional project in Serbia whichbased on CEO comments it should add significant value to ADT in time (haveassumed $0 value to ADT) whereas BGL has no other project (ADT looking forother add on other projects as well)
- ADT is exposed to primarily 4 metals (Ag, AU, Zn and Pb plus 2 verysmall amounts for Cu and Sb) with about 50% exposure to precious metals (Ag andU so the difference to BGL is not as big as one thinks)
- One could argue ADT has a lower exposure to metal prices as ADT has 4primary metals, but BGL is exposed to just one and so should have predictablerevenue and profit
- ADT capital cost was about $A100m less than BGL
- ADT may ha
Sign In
Follow the stocks
