Symbol Lookup »
($$) Newsletters »
Self Directed Investor Inc
Newsletters ($$) »  Email alerts (free) »  RSS »
SDI: "Empowering investors with ideas and education"
$$  Newsletters  |  FREE   ♦ Articles · Videos · Calls  |  TOPICS  ETFs · Earnings · Economy · Energy ·  ♦ Gold · Income · Personal Finance · Trading


The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Saturday, June 28, 2008

UPDATED Emerging Gold Producers Ranked -- Projected Cash Flow Method

One of the quantitative techniques I use to evaluate emerging gold producers is the ratio of projected future cash flow price (10x cash flow assumption) to current price.

This technique provides a standard quantitative comparison of company share valuation that serves as a starting point for my assessment of whether or not to invest in an emerging gold producer stock.

Once I have a standard quantitative measure of assessment, I can apply qualitative factors to the investment decision like political risk, currency exchange risk, property rights risk, remote site risk, single mine risk, operational risk, and management competence risk.

The following is my analysis of 15 emerging gold producers using a cash flow multiple ratio for projected 2009 and closing share prices on May 9, 2008. The higher the projected cash flow multiple, the more undervalued the stock.

MAY 9, 2008
1) Metanor Res......3.7
2) Gold-Ore Res.....3.5
3) Gold Resource....3.5
4) MDN Inc..........2.9
5) ATW Ventures.....2.5
6) Jaguar Mining....1.9
7) Capital Gold.....1.7
8) W. GoldFields....1.6
9) San Gold Res.....1.5
10) Minefinders......1.5
11) Alamos Gold......1.5
12) Jinshan Gold.....1.5
13) Apollo Gold......1.2
14) Aurizon Mines....1.1
15) Kinbauri Gold...(NA)

JUNE 27, 2008
1) Metanor..................5.4
2) Gold-Ore................4.2
3) Alexis Minerals.......3.9
4) Timmins Gold........3.4
5) Gold Resource.......2.9
6) MDN Inc.................2.2
7) ATW Ventures........2.2
8) Jaguar Mining.......1.8
9) Minefinders............1.6
10) Capital Gold..........1.6
11) Western GoldField..1.5
12) Jinshan Gold..........1.5
13) Apollo Gold.............1.5
14) Alamos Gold...........1.4
15) Aurizon Mines.........1.1
16) San Gold.................1.0
17) Kinbauri................(NA)

Alexis Minerals and Timmins Gold were brought to my attention by readers of the Gold Stock Strategist. Both companies are significantly undervalued using a cash flow valuation method and coming in at #3 and #4, respectively, in comparison to their peers.

Metanor Resources and Gold-Ore Resources remain even more undervalued using a cash flow valuation method compared to peers as their share prices are down about 10% over the past month.

San Gold is a special case and a case where the cash flow method is inadequate when it comes to valuing emerging gold producers. San Gold has reported significant drill results in their Hinge deposit over the past month. These drill results have helped to drive the share price of San Gold up about 50% during this time period. These drill results do not enhance their production plans for 2009, but do indicate a growing resource for future production. Congrats to San Gold management and shareholders on this wonderful news.

San Gold's share price action on these drill results is good news for emerging gold producers. It suggests that as the other undervalued emerging gold producers begin to report good drill results and prove up their resource, their share price should benefit.

Something seems to be up with MDN Inc. as the share price rose about 35% over the past week or so. Speculation is that Barrick may be considering a buyout of their joint venture at Tulawaka in Tanzania. That would be good news as MDN Inc. has other properties in Tanzania and would provide resources to speed up development at those sites. It has been tough for MDN Inc. shareholders as little information has been forthcoming from Barrick, who is the operator of Tulawaka, on the progress of this project--even though MDN Inc. has been enjoying cash flow in this joint venture.

The price of gold rising this week has given ballast to the junior gold miners despite major market compression. I expect the value in the emerging gold producers will begin to be realized over the next few months and into 2009.

Gold Stock Strategist

1 comment:

Anonymous said...

Would Vista gold be inclueded in your list of companies? I believe they are planning on starting construction this year and being in production in 2009 in their Mexican property.

Gold Price Chart--Interactive

HUI "Gold Bugs" Index--Interactive

Breaking News!

    follow me on Twitter

    Gold & Mining News

    Seeking Alpha on Gold and Miners

    Lijit Search

    Disclaimer and Copyright

    Gold Stock Strategist receives no payments from companies in exchange for coverage. The Editor does own and authors may own and trade stocks they mention.

    Nothing in is intended to be investment advice, nor does it represent the recommendations by or other authors.

    The reader accepts information on the Gold Stock Strategist with the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action.

    The information on the Gold Stock Strategist is solely for the entertainment of the reader and authors.

    The Editor reserves the right to delete material deemed inappropriate for

    ©2008-2009, Nystrom & Associates LLC, All rights reserved and protected under US copyright law.

    FEEDJIT Live Traffic Feed

    SDI Featured Articles | Self Directed Investor | Copyright © 2008 - 2009, All Rights Reserved

    Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of Self Directed Investor, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will Self Directed Investor, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

    SDI is associated with: -- participation in SDI's conference calls is available exclusively to ValueForum members. | -- weekly SDI videos are produced by Market News Video. | -- stock quote content is at least 20 minutes delayed and is powered by Ticker Technologies. | -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.