OMG…How did you derive these numbers?
First, the company has no mining assets, employees, or capital to use to begin operations. They haven’t even started to mine any property. They haven’t even started mining the property they took possession of in 2007. So how do you take the existing share structure and extrapolate out the entire future mining potential of this company based on the existing structure when it is clear they need to raise capital to mine and like most financing deals, including the present financing agreement, they come as convertible debentures (i.e. dilution in shares not yet taking place). How much up front capital do you estimate it takes to even begin mining property (payroll, capital equipment, permits, etc….) When will it commence? It has already been 7 months since April 2010.
Do you really think the entire mining potential in dollars will be valued over the existing 61 Million structure? Really? Is there any proven history to this lack of dilution with zero dollars and some huge outstanding debt (unpaid properties/loans)? You realize that, as an example, the company still owes 500,000 shares for the property they haven’t yet paid for – i.e. dilution? And that $10 million loan out there with Melco and starting due in 17 months (24 months from first borrow point), factoring in the 5:1 forward split (deal was pre-split so don’t think that $2.00/share cost still applies) prices the shares at $0.40 - $0.50 or somewhere North of 20 million shares. And they still haven’t started mining.
So based on this theoretical valuation, where exactly is your valuation factoring for required financing to begin operations, negative margins at start up, operating expenses during the initial operating loss quarters, or do you really think they will start up this mine at 25% profit margin on day 1. If you have historical research on mining operations and their start up costs and margins that would be extremely helpful as they are as pertinent as these P/E ratio’s and margins you are proposing.
How many years do you think this will take as well? Your factoring assumes that this will all yield in a single year which we know it won’t. For example, $3 Billion over 10 years would create a vastly different PPS than $3 Billion over 1 year. If the company is a $300 Million per year producer it is not going to price at $3 Billion. That all factors into the P/E ratio’s used correct? EPS is trailing 12 months and P/E is also trailing 12 months so what exactly is the 12 month mining values not the life of the mine? If you disagree, look at how they value real companies and compare apples to apples.
Now, to all those that will not like this post, congratulations on this run and remember, never fall in love. With 3.7 Million shares traded, somebody sold 3.7 Million shares at these prices and you are buying them. What do they know?
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