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Zoros, $1,200 is approx £960 not £1,600
So the 27p becomes 16.4p
The strategy behind the 60/m/85m seems pretty straightforward to me.
Would the Newcrest BOD give up 5% of an asset that will grow exponentially over time for only $85m? No. Does the 60m buyout price satisfy our investment decision making hurdles, especially at a time of ballooning Newcrest debt? No.
I think that is the thinking behind their 2 decisions. Having said that, it does leave us vulnerable until debt financing is in place to cover the next 18 months or so.
Hence neither option has been taken.
TMT, sorry for your loss. Your story knocked me for six this morning, such warmth and beauty, yet so sad and poignant.
May your faith, family and friends guide you through this tough time. GTD.
Thanks TT. I’ll be honest i was a little concerned with last nights MRE but whenever a small amount of doubt creeps into my mind this board always seems to get me back on track.
I guess one of the consequences of GGP’s success is that like many on here my cash holding is getting scary and potentially life changing (not in the millions like some but still substantial). So whereas in the past year or so i have been just sitting back and enjoying the ride, i can feel my focus changing slightly too ‘this is becoming too large a figure to lose. The key work for this share is Patience.
Thanks for the replies. Yes their there will be an element of forward projection within the share price but my point was just about some people thinking the mre alone gave us a 33p share price. Keeping the rest of my assumptions the same, the gold aisc would have to be $150 for the mre alone to justify 33p. That does seem a very low AISC.
I fully recognise that the drill results over the next year or so will give us a lot more than 3.4m but I read a fair few posts last night saying the MRE justifies the current price. But that just isn't true and it's misleading. It comes from some not understanding co valuations. It is important that we talk about this and not just shoot people down because you don't like the number. But here goes my rudimentary valuation with full assumptions so I can be shot down if I have missed something obvious (and I would love someone to point out a glaring error that means I have undervalued the MRE)
So, assuming gold selling price of $1,750/oz , AISC of $1,000/ oz. GGP shares 4.206 bn, GGP share of Hav 30% (after PFS). Exchange rate of $1.30. 3.4m oz.
Our 30% share of Hav would be valued at 14p ($2.55 bn, divide by 1.30 x by 30% then divide by shares of 4.206bn) . Or 4.1p per 1m oz (as a metric that is easier to relate to). Doing a similar exercise on the copper with $7,000 tonne sp and $4,000 tonne aisc and 160,000 tonnes gives us a 3p valuation, so combining the gold and copper means last nights mre gives us a share price of 17p.
I appreciate the AISC is such an unknown for us, the Telfer aisc for FY2019 was $1,253/oz not the $1,000 I used above. I expect that as the volume increases through Telfer (from Hav) that the fixed costs within the AISC will come down. But against that does Telfer require significant capital expenditure to upgrade its plant? (In FY2018 accounts Newcrest took an impairment hit on the Telfer plant, implying that either the machinery was old or there was no expected new source to cover Telfer costs). Just to give more detail, if I used a gold aisc of $750 that would imply the 3.4m was 19p so 22p inc copper. And if i used the actual FY 2019 AISC of $1,253 that would imply the 3.4m was 9p so 12p inc the copper. You could well argue that the gold selling price should be higher than the $1,750 I have used but speaking as a chartered accountant I think the market will be prudent on that particular metric.
So my opinion is the mre values the company at between 17p and 22p. And that doesn't take into account the 'time' value of money through a discounted cash-flow method which would slightly reduce those valuations. Nor does it take into account the costs 'below the line' , for example professional fees, forex hedges, interest, admin salary costs (inc directors), etc. that sit outside the AISC.
I reiterate that this share is close to changing my life. But I am not interested in 'this share will be £'s', 'the market doesn't understand us'. I am interested in firm numbers that back up valuations. Pension funds managers and investment house managers who will drive this price up will be working to a large extent on certainties (ie mre) and paying much less heed to 'potential' than us PI's. Hopefully the spirit of this post comes across (that I want us to end up with a realistic valuation metric that we base decisions
Another 10p on the share price and i can retire, well ahead of when i had originally planned too but am i the only one slightly concerned about Telfer having such a high AISC?
I know that with an increased volume through Telfer from Hav the fixed cost within the AISC will come down but as Telfer was running towards the end of its useful life before Hav then will there need to be a further capital expenditure programme required to bring it up to date? Or has the processing method not really moved on since Telfer was built and so any capex spend will be negligible? (Genuine q as i have hardly any knowledge of mining)
Thanks everyone. Whilst each individual has to take responsibility for their investment decisions, the replies have helped reassure me that the true value of GGP is a lot higher than the current price.
Thanks Archways. Unfortunately that brings down the 3p figure, but, i’ve just checked the NC quarterly report and their aisc is $738/ounce, so substituting my 1,000 for their 738 and dividing by 4.2bn rather than 3.8bn gives 4.2p/1m. Thats much better than my 3p figure. If it was 4.2p, then the market is valuing us at 4.88m ounces when all the indications are we have a fair few m more than that at Hav.
Thanks Lifesagame, i am no doubt one of many who have been here a while, but just couldn't come up with anything of any value worth posting:)
Evening everyone, this is my 1st ever post on LSE. I researched GGP in Winter 2017 and have been a sh/holder since Jan 18. Without disclosing my detailed personal finances, it’s fair to say that if the SP hits my target of 35p it will be ‘life changing’ for me. I have close to zero knowledge of mining but as a co accountant i know a little bit about co structures and valuations. So my query is on the valuation of Hav. If NC do want full ownership of Hav, they will no doubt be using a recent average (1 -5 yr?) POG to determine their buy out price rather than the current higher POG (as a negotiating strategy if nothing else). I dont know what the recent average is but if it was say $1500, and say 10m ounces in Hav, then deduct A I S C of say $1,000. That would give Hav a value of (1,500-1,000) x 10m =$5bn. Take our 30%, which is $1.5 bn, exchange rate approx $1.275, so £1.176bn. We have 3.8bn shares so that would make our SP approx 3p per 1m ounces. So is 3p/1m a fair ballpark to be using or have i missed something fundamental?
Also, assuming they dont buy out our 30%, does anyone on here have knowledge of Aus transfer price regulations? (I dont). If i was NC i would charge Hav co a large Telfer ‘processing’ fee for using their facilities, hence transferring extra profit from 70% owned Hav Co to NC. I would also be charging Hav co any other ‘management charges’ i could find. Hopefully thats all just a worry about nothing, my preferred path is NC buy out our 30% and GGP pay us a special dividend, leaving enough cash in the business to fund exploration of the other sites.