Van Yahoo:
Lets value JAG.
The only realistic way to value a Gold Miner is to estimate the net present value of the potential future cash flow, discounted at an appropriate rate. You have to take into account not just the cash flow that the company is generating, but also sustaining capital costs (including future exploration and development costs), offset to some extent by the likelihood of success, associated with keeping the mine in production. Assuming you can derive a suitable cash flow model for each mine that a company owns you can then calculate the net present value of future cash flow by including the geological, political, social and financial risks. If you sum all the net present values together, add any other assets on the balance sheet and subtract any debt, you will arrive at the net asset value per share. In a rational world you would expect to pay no more for a mining stock than its net asset value per share.
Using the data below, and given Jaguar are in great geological location with extensive available land, and remembering that Cash provided by operating activities in 2011 totaled $71.9 million, or $0.85 per share.
A full roll out of production should take the Market Cap to around $1.2b we then discounted possible dilution to fund exploration and expansion to arrive at the $10 target, a very conservative target and the price one would put on an offer for the company at the present time.
Another upside factor is the Gold Price, the calculation of the $10 buyout value is not inclusive of any growth in the Gold price.
Morgan Stanley projects gold prices will rise to $1,845 per ounce in 2012 and $2,175 in 2013. For now they see that absence of central bank sales, limitations in size of the scrap gold pool, the rising demand from ETFs and coin sales is likely to see the bull market last into 2012 – 2013.
For the full year 2011, Jaguar produced 155,764 ounces of gold, sold 155,525 ounces of gold and reported record total annual revenue of $243.1 million. For the year the Company reported a net loss of $65.6 million or $0.78 per fully diluted share. Jaguar reported an adjusted net income of $3.6 million or $0.04 per fully diluted share in 2011. Cash provided by operating activities in 2011 totaled $71.9 million, or $0.85 per share.
So that is how Shangdong came up with the offer back in Nov 2011. Now Shangdong will go hostile with a $2.50-$3,00 first offer. There will be other bidders on JAG as were back in early 2012. Like said, this will be very interesting, and they will move quickly to buy JAG.
You are Welcome:)