@somapig
To be honest, I have no idea where the stock may end up closing its first trading day of 2017 on Monday. At the risk of sounding obvious, I’d say that a very wide range of outcomes is possible, depending most critically (in my opinion) on what sort of value investors are willing to attach to the underground mine at Talang Santo and to the exploration potential at Way Linggo; both of which are anyone’s guess, really.
In terms of levels where I’d personally be happy to add to my holdings, I think at this stage I’d want something that can be economically attractive (i.e. can repay the initial capital outlay out of Free Cash Flow within say a 3-year period, roughly speaking), even without the underground mine.
With the POG here, and with some reasonable assumptions on production rates and costs, I see that level in the range of 6-7c, which by the way is in line with the current reported NTA of 6.9c/share (see page 1 of the Pro-Forma Balance Sheet announcement from yesterday); so, it looks like the underground mine is essentially (and conservatively) being carried at no value anyway, i.e. little chance for writedowns from here on.
If you do factor in the underground mine in a DCF calculation, then the PV/share can easily get to the levels you see.
So, in the end, I see it mainly as a matter of how much one is happy to pay upfront for that “option”.
At zero, I’d certainly take it.
All IMHO, DYOR & GLTAH
