LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

COT Gold, Silver and US Dollar Index Report - May 17, 2019
By: GoldSeek.com

Gold Miners’ Q1’19 Fundamentals
By: Adam Hamilton, CPA, Zeal Research

Three safe-haven reasons to own gold
By: Richard (Rick) Mills, Ahead of the herd

Trump’s China Blunder
By: Peter Schiff, President and CEO Euro Pacific Capital

Is the Trade War a Catalyst for Gold?
By: Jordan Roy-Byrne CMT, MFTA

Bitcoin Mania Is Back! Are You Ready to Rumble?
By: Rick Ackerman, Rick's Picks

Precious Metals Update Video: Gold support around $1,282
By: Ira Epstein

Asian Metals Market Update: May-17-2019
By: Chintan Karnani, Insignia Consultants

GoldSeek Radio Nugget: Louis Navellier
By: Chris Waltzek, GoldSeek Radio

Gold: Ratio Charts Offer the Key to the Bull
By: Rambus

>
 
Search

GoldSeek Web

 
The Real Cost of Growth for Gold Miners Part 2


 -- Published: Monday, 11 April 2016 | Print  | Disqus 

In The Real Cost of Growth for Gold Miners – Part 1 we measured the cost of growth of eight Mid-Tier miners - B2Gold (TSX:BTO), New Gold (TSX:NGD), Endeavour Mining (TSX:EDV), Oceana Gold (TSX:OGC), Primero Mining (TSX: P), Newmarket Gold (TSX:NMI), Teranga Gold (TSX:TGZ), and Alamos Gold (TSX:AGI).

In the second part of this series we will show how growth is reflected in the market value of the companies.

MARKET VALUE AND GROWTH

Market Value per R&R

We begin by measuring how the market values the eight companies based on Reserves and Resources in the ground. Our previous research (Real Cost of Mining Gold) showed that major mining companies are valued based on the R&R they have in the ground with a premium given to companies with a long history of successfully bringing those R&R to market.  Let’s see if the same holds true for mid tier companies. We use Enterprise Value (EV= Market Capitalization + Liabilities – Current Assets) per oz R&R and EV per oz produced.

The eight companies have a relatively short production history and started producing at different times – 2013-2015 is the period that captures everyone in a comparable growth stage.

http://goldseek.com/news/2016/4-11cr/image002.gif

The table present averages for the period not change in the variables for the period

Reserves and Resources for the period are calculated on an average annual basis

Enterprise Value (EV) is calculated on an average annual basis

 

The chart shows a positive correlation between number of ounces in R&R and market value per ounce - the higher the number of R&R ounces is the higher the market value per ounce R&R is. Primero seems to be an anomaly, which we can hopefully explain with the operational health ratios further in the analysis.


Enterprise Value per oz Produced

http://goldseek.com/news/2016/4-11cr/image004.gif

The table present averages for the period not change in the variables for the period

Production size for the period is calculated on an average annual basis

Enterprise Value (EV) is calculated on an average annual basis

 

This chart does not show the same positive correlation as the chart above, confirming that size of R&R is largely what the market responds.

Mid-tier companies need to achieve critical mass to attain higher market valuation. We know that the market values the size of R&R and growth. Now let’s see if there is a time value attached to this growth.

Market Value vs Velocity of Growth

To measure that we use what we call the speed of growth and compare it to the market value.

The speed of growth or the Average Annual Velocity of Growth is the total change in R&R since the company commenced production divided by the total number of years they have been in production.

 http://goldseek.com/news/2016/4-11cr/image006.gif

The chart shows a positive correlation (exception again is Primero) to market value and speed of growth indicating that the market does reward faster growth.

We have shown that the market values size and speed of growth higher than it values production level.

In Part 3 of The Real Cost of Growth for Gold Miners we will look into the companies’ operational efficiency and find out if it relates to a market premium or discount.


| Digg This Article
 -- Published: Monday, 11 April 2016 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.