RoX's Investment Forum

[cleverrox]

Valuing GORO.OB.

Cost per ounce to mine: $100
Price per ounce sold: $800
Cash flow per ounce: $700
Ounces mined first year: 75,000

Cash flow per share = 75,000 ounces * $700 per ounce / 35M shares = $1.50 cash flow per share

Bobwins says gold producers are valued at 10 to 30 times cash flow.

10 * $1.50 = $15 a share
30 * $1.50 = $45 a share

I check this out today by looking up the valuation of AUY. It was 17x cash flow. I think GORO could probably command a premium multiple due to its growth possibilities and since it will be going to 125,000 ounces per year by year three (2010).

Another upside is gold over $800 an ounce. India and China having been buying lots of gold as their economies blossom. I don't expect a big downward shift in gold prices in this commodity boom era with the U.S. government racking up record deficits.

RoX