gbm valuation

To be "average" in terms of the market value of their In Ground Gold, GBM's SP should be 17.9 cents per share.

This assessment is based the current comparative data on Goldnerds.com.au, updated with the last two GBM announcements.

By explanation, Gold companies can be valued according to the amount of "In Ground Gold", weighted according to the cost of production, the price of gold, and their rate of production.

Of 52 ASX listed producers, (out of a total of some 310 ASX listed companies), GBM is the third cheapest of the producers, by ratio of Market Cap to "ounces of mineable gold".

When you spend $ 13.00 on GBM shares (at the current SP of 2.3 cents), you could be said to be buying the equivalent of one ounce of In Ground Gold.

We don't know exactly how much it will cost them to produce it, but their original forecasts were direct production at $ 430 per oz and in the last two years this rose to $ 700 per oz. If those are still correct, That's still a potential profit of $ 687 per $ 13.00 invested in shares.

Of the 52 producers, the cheapest IGG can be bought at $ 4.00 per Oz, the most expensive $ 1753 per ounce. The market average cost of an ounce of In Ground Gold is $ 102 per oz.

To be just average, GBM's share price should grow $102/$13 = 7.8 times. This would equate to a SP of 17.9 cents, up from 2.3 cents.

So what does GBM need to do to become "just average"?

Well, to many people it's blindingly obvious. Can anyone get the messages through? Nope. Not for the last few years. That's the reason why the company is undervalued. These boys don't get the message.

Still, I have made some dough lately, so I am buying. I agree with NK, an SP of 7 cents or so, while still a vast undervaluation, is reasonable in the near term, even given the track record.