I mainly use forward cash flow and PE multiples using forecast LOM ave costs, production rates, etc and based on a flat gold price near spot.
Then I choose a multiple that seems appropriate for expected mine life (maybe a multiple of 8 on a 10 year mine life that looks quite likely to be extended).
Usually I don't bother discounting future cash flow with gold stocks because I assume the long term rise in the POG offsets the need to do so. If I was going to use a discounted cash flow model, then I would use a steadily rising POG assumption and the valuation would work out about the same (depending on assumptions of course).
A discounted cashflow model has some serious problems with the main one being; how on earth does any one know what the POG or cash costs will be in 3,5 and especially 10 years?
Using multiples is a good enough method considering the high likelihood that assumptions in a cash flow model looking out over 10 years are almost certain to be way out.
Who would have used $1650 for gold and cash costs of $500-$800 in any model 10 years ago when gold was at $300?
Discounted cash flow models over that period of time are a waste of time and effort IMO.
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