Valuation

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Rudeboi

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If i want to comapre a co. ( small cap mining ) with other international co. in the same industry/ field ..what attributes should i be looking at ? ?
Basically i want to determine how this co. is priced in comparison to its peers in the global market ??

It does not really have stable earnings yet to look at P/e or Roe ..its a mining co. just going into production ...
Hopefully some you seasoned analysts will be able to help me out ....



Edited 2 time(s). Last edit at Thursday, September 28, 2006 at 04:17PM by Rudeboi.
 
Not sure, have no experience with mining companies. Best wait for another opinion.
 
I am not a mining specialist but their might be a mean to find out what the reserves are and have some type of multiple there
I am thinking along the lines of price to book but the book would be "reserves"...
ok someone pls help me developing these thoughts
 
mining company valuations are based on reserves--and quality of reserves (extraction ratios)--multiples play no role in valuation.
 
so i wd have to comapre it against a co. witth similar reserves / production potential ...damn this is gonna be a lot harder than i thought because the co. is a diamond mining co.
 
no you can break it down to EV/reserve oz or some other common denominator--just like you would when you compare any other company.
 
Mining Companies...
You would need to look at "P&P". Proven and Probable reserves. Also take a look at the "ore grade" of these reserves. Your comp set should consist of other publics that mine similar ore and extract the same mineral from that ore. It would be hard to comapre gold miners vs silver miners as gold is a much more valuable resource. Common multiples used are EV / P&P reserves.
The higher the "ore grade" means that more precious metal that is extracted from the mined ore. The higher the number the better. So an ore grade of 107.1 for a silver miner means that they will mill 107.1 grams of silver for every tonne of oxide/sulfide ore that is mined. So, this would def. be more valuable then a comp that mills 80 grams per tonne. I have also seen people that will calculate the NAV / P&P. In this process you assume a certain production life of the mine, future commodity prices and production cycle. You would then PV the expected value of the mined reserves over, lets say, a 10 year life of the mine assuming you straight line production, using a discount rate between 9%-10%, also referred to as "PV10" (more commonly seen is the oil and gas industry). There a coupls more steps but they allude me at the moment. Sorry
 
as an aside, you could potentially make a lot more money as a miner than as a mining analyst/associate
 
^-- amen to that. geologists are making more than the CEO's at a lot of minging and oil/gas e&p companies. and if they're able to get an override...lookout! those colorado school of mines guys are killing it.

rudeboi, all of this advice about reserves is true, but i would be wary about trying this out with no experience, little understanding of mining economics or jargon, and no one with experience to guide you along the way. i am saying this as someone who pretty extensively covers energy companies and remembers what it was like first starting to analyze the companies. it can be tough. good luck
 
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