I take a more modest view of the future share price of SGR, based on the following criteria and with no further share dilution: (all figures in $US)
Annual production = 200,000 ounces for 100 years
Average selling price per ounce = $ 1200
All-in cost of production per ounce, including retained earnings = $ 600
Shareholders equity = $ 600 per ounce x 200,000 = $120,000,000.00
Shareholders equity per share = $120,000,000.00 / 300 million = 0.40 cents
Price to earnings ratio @ 10x = $4.00
It follows, then, when we finally, mercifully, get to an annual produciton of 200,000 ounces we will be fairly valued at $4.00 per share. So why buy and hold @ $4.00 ?
Because for reasons known only to the GODS of gold, almost all gold miners trade at higher PE multiples than 10x. As of July 16, 2010:
Agnico = 173x
Kinross = 31.5x
IAM Gold = 51.3x
Yamana = 34.1x
Eldorado = 49.7x
Goldcorp = currently losing money - cannot measure
Barrick = currently losing money - cannot measure
So if we traded at Eldorado's PE, our share price would be 49.7 x 0.40 = $19.88
Fred25
