£2 a share value27 Jan 2012 00:24
Our NPV values after tax cash-flows at £116.3m (10%) or 122p per share fully diluted.Such a financial valuation cannot account for the fact that Vatukoula owns a mine that inall likelihood has decades of production ahead of it and the scarcity value that entailswithin the context of resource debasement globally (see the discussion within thisresearch note entitled gold resource debasement).The valuation is also influenced by the difficulties accessing and delivering to the mill highgrade underground ore over previous quarters. As a consequence of these difficulties,2012 forecasts in particular have additional built-in contingency for both head grade andcosts. In the event post factum production data confirms continued reversion to theproduction mean, our scenario analysis indicates a substantial uplift in valuation iswarranted. This uplifted valuation is the central case, and uses stated reserves as theproxy head grade. Our valuation in this scenario equates to circa 200p per share.