Market valuation2 Oct 2020 16:58
I have tried to evaluate the valuation that the market will put on MTL now that everything is clear and out in the open. At the suspension price equity was only valued at £15m, this valuation was close to £35m before the panic selling set in because of debt for equity wipe out fears, clearly the market was starting to place recovery value on the stock, even before recent news.
Significant events since the suspension in March include....
A gold price some $500oz higher
A return to profitable operations
Reduced interest on the debt
No debt for equity has occurred
Financial uncertainty removed
Purchase of new trucks & loaders improving operation performance
A clear runway for MTL to pay down the debt, which sits at circa £100m.
As the market is a forward indicator I will assume the debt can be reduced by a conservative £15m a year, every £10m reduction is worth .50p of value. For example if MTL had no debt, based on current production, I believe the company would be valued at circa £150m or 7.5p a share.
I will therefore have a stab that equity will be valued at at least £50m on re-listing which is circa 2.5p a share, ultimately the share price will depend on how many sellers come in and how many buyers see value. I feel the market will see the debt falling and apportion value accordingly so the price could move to 3p or even 3.5p.
A recent example was Goldstone who were suspended for some months for a technical breach, their shares were suspended at around 3p but were chased up to 6p on re-listing day. They are now 8p, not producing but the uplift came via sector sentiment.
There are many factors how to value MTL, I am no analyst but I have attempted to be logical and not over optimistic. Would love to hear others thoughts on this.
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