Another measure that I use to value gold companies is the EV to Gross Operating Earnings. By Gross Earnings, I mean the assessed revenue of gold sales less the overall cost indicated by the AISC. In effect this is a measure that reflects the production level, the gold price, and the AISC. At this stage I have been using an assumed gold price which I adjust in line with the spot price but since the POG has been rising, I have been setting this beneath the current gold price since companies do not make daily sales. Right now I am using A$1780/oz. With more effort I could maintain the expected sale price for each company based on its hedging plus an assumed price that reflects the spot. However, I have not gone to this effort yet since my aim is have a comparative measure across companies rather than an absolute value.
Anyway, at present MOY is on a value of 2.6 compared to AQG at 2.4, RMS at 3.3, BLK at 3.4, RED at 3.7, RSG at 5.3, EVN at 8.3, NST at 10.6, and GOR at 11.1 (based on initial production from Gruyere commencing soon). So, you can see that MOY is also cheap on this measure.
BTW, I resist attemping to create a single measure to rank all companies but prefer to review several different ones across various important factors, including EV, reserves, resources, AISC, production, POG. At the end of the day, I need to assess the likelihood of a company meeting its targets and whether there will be substantial changes in resources, production and costs going forward (apart from the POG, this is the area of risk).
MOY Price at posting:
14.0¢ Sentiment: Buy Disclosure: Held
