Valuation

Hey Gang, a mate put me onto BGL a few weeks back, and after a quick deposit valuation based on inferred it was a no brainer. We are genuinely miles off a reasonable valuation for the asset and potential earnings based on todays gold price.

Using the most recently published all in sustaining cost standard (AISC) i could find, the average for large producers is USD 900 per ounce (end of 2019). This includes capital outlay and running the office. With todays gold price of ~USD 1700 per ounce, this leads to a profit of ~USD 800 per ounce, or AUD 1200 per ounce. Assuming 95% recoveries, this leads to AUD $2.5B profit on the 2.2Moz resource, even accounting for capital and opex. Assuming a 10yr mine life and average thorughput, that is $250m per annum profit.

At a P/E ratio of 10 this would equate to $3.70 per share, at a P/E of 15 it is $5.50.

I think this is a conservative AISC given the previous development/roads etc into the area, and costs are likely declining further given current deflationary inputs such as wages/oil etc, and the inflationary pressure on gold from stimulus.

Furthermore no accounting for increased resource which is likely, and no allowance for M&A to expand with all that free cashflow.

Seriously considering selling my children.

Please challenge/counter/correct, just a 10min conservative valuation here. What are your thoughts?

References below:

https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/large-gold-miners-saw-declining-costs-in-q4-19-lifting-profit-margins-57672395

https://s23.q4cdn.com/685814098/files/doc_presentations/2020/05/08/marketingMay82020.pdf