fundamental valuation of sundance, page-18

I am looking at this stock for the first time. I wouldn't disagree with the other valuation work/ideas on this thread, but there is another, albeit simplistic, way of looking at it.

If the company reckon that the mine will produce $1bn a year for 20 years, then upon commencement of production you could logically argue that the company should trade on 20x earnings or, say, $15bn (I am taking a wild guess at costs), toss in some risk factors (but mitigated by assumptions of rising ore prices over time) one might value the co at $10bn. Assume 6m shares after finance dilution, that would give an approx value of $1.65 per share, on production start date. You might also assume in five years the commodity price has risen (although I suspect it may slump in the interim) and so guess at the stock being worth $2+ in five years once the mine is open for business. You then kind of work that backwards drawing a mental price chart, depending on what your feeling is for the various risks, and I imagine also work in a couple of years of delay (there are probably some good examples of comparative price charts for similar projects in the years leading up to production)

However, if I were to hazard a guess, I would still put the value comfortably over 20c today, and probably more like 50c at this stage, but probably not 80c. My logic? I am reckoning that investors might expect to be repaid about four or five times their initial investment over perhaps six or seven years to take a risk on an investment like this.

Then a, justifiable, credit crunch discount should probably be worked in, given that this may delay or increase the cost of financing. One might knock 10c off whatever figure you came up with.

I know this may seem rather rudimentary, but this is how I am inclined to look a it personally. As we have just seen, sophisticated NPV models when applied to far off projects in far away countries are not necessarily great predictors of share price movements.

All comments, improvements and abuse welcome....