I've been intrigued by this stock for a while and researching valuation metrics used in the mining industry. When finding past takeovers/buyouts, it seems that the magic valuation metric is $ per resource ounce, and that metric averages around 19.5% of current spot. This is great, because BAA has a &^%$load of resource ounces.
Back of the envelope valuation:
current spot, we'll say $1,300, multiplied by 19.5% = $253.50. The value per resource ounce of gold, based on past takeover transactions at a little lower than todays spot (always be conservative in valuation) is $253.50.
BAA has about 11M resource ounces. Let's call it 10M.
10,000,000 resource ounces x $253.50 = $2,535,000,000 valuation
They have 276,000,000 fully diluted shares.
$2,535,000,000 / 276,000,000 = $9.18 / share
Let's say they offer another round of preferred's just to be uber conservative, and the fully diluted number of shares grows to 315,000,000.
$2,535,000,000 / 315,000,000 = $8.05/share.
Let's be even more conservative. Let's say due to Yellen and the gold price fixing scheme that spot gets crushed to $1,100/oz.
Let's now discount a country/geopolitical risk factor from the valuation metric of 19.5% and say companies get purchased for half that amount, or 9.75% of spot for resource ounces of gold.
$1,100 x 9.75% = $107.25 per resource ounce of gold.
Let's take it even further and say that it's impossible to get to half of their quoted resource ounces of gold, and they can only get to 5M ounces.
$107.25 x 5,000,000 ounces = 536,250,000 valuation. We'll keep with our assumption of another round of dilution leaving them with 315M common shares.
$536,250,000 / 315,000,000 = $1.70/share
Now let's use todays figures and a bullish call on spot gold. We'll say they get taken over in 2 years when both mines are rocking and rolling and they are in the process of using internally generated capital to build new mines to tap into that 10 million ounces of gold they're sitting on. In two years let's say spot gold is $1,500/oz (though I do think it will be much higher). We'll use the metric of 19.5% of spot for resource ounce of gold.
$1,500 x 19.5% = $292.5 per resource ounce of gold.
$292.5 x 10,000,000 resource ounces = $2,925,000,000 valuation
$2,925,000,000 / 276,000,000 shares = $10.60/share
$2,925,000,000 / 315,000,000 shares (if they offer more preferred shares rather than take on debt) = $9.28/share
We could go round and round all day with assumptions for all of the inputs (thank you Excel). At the end of the day, unless I am missing something, this looks to be at least a 5-bagger.
Disclosure: I am lonnnnnnnnnnnnnnnng BAA
AI
