Volume of ALD on asx and lse are pretty dismal but valuation does not look too high imo.
If they mill 1.3mt ore this year, at 2.59g/t and 87% recovery, they look likely to produce around 97koz.
However, if we assume a more conservative 75koz for 2008 then the numbers still look pretty good at an average of $900 gold.
After hedge sales of 28.6koz they could be selling 41.6koz at spot - for total revenue of around US$61.7m.
After costs of around $23m, G&A of $5m, Interest of $4.8m, pre-tax earnings should be around $29m.
I imagine they will have tax offsets, but assuming they pay tax of $5.7m then net earnings could be of the order of $23m.
Using fully diluted shares in issue that approximates to 6c of EPS this year and about 11c/share in 2009.
It then comes down to what earnings multiple is applicable! I would suggest they should be at least x15 given their exploration upside and the recent JV with Barrick.
That would put the shares on a fair value of 90c this year and $1.65 in 2009.
Clearly, the movements in POG will drop to the bottom line so I guess much depends on ones view of the continuation (or not) of the gold bull. CPDLC
ALD Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
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