Argonaut - Crow Keeping up with the Flock, page-4

Hey Netraam. Unfortunately I don't think its that simple. The market is forward looking. It is certainly pricing De Grey on finding more ounces. It's just impossible to know exactly how many because it depends entirely on the resource multiple you apply, and thats all relative/speculation.

I think ~$100/oz has been a reasonable estimate in times gone past to value a gold company. That would imply the market is anticipating ~12moz. With the gold pricing having run significantly though, and what seems to be an obvious bull market emerging (and we are only at the early stages) the market will certainly pay a hefty premium for DEG relative to historical norm pricing.
Why? There have been virtually zero Tier 1 discoveries in Tier 1 jurisdictions over the past decade. It makes valuing DEG a very tricky proposition, but you essentially have to value DEG on a $/oz resource multiple premium compared to your average run of the mill development company.

How much higher can it go? Well... look at Afterpay, Apple, and other tech names. The market, especially in the passive investment world that we now live in, will pay what seems to be ridiculous multiples for the best exposure to the sector. Remember, buying begets buying. As we grow we open ourselves up to a more broad investment universe, and certain funds will be required to own DEG, whether they like it or not. That buying drives the price higher, opening it up again to a broader range of investors, and it becomes a self-perpetuating spiral. Even active fund managers need to buy the stocks that are rising, otherwise they will significantly underperform their benchmarks, and that equals them being sacked.

I think this is a likely outcome for DEG, and as such I think we will always screen as 'expensive' relative to the rest of the market. The thing is though, generalist investors who are not familiar to the resource space are going to call up their brokers and say "give me something that has significant upside exposure to higher gold prices (tick.. ounces in the ground is the best way to play a rising gold price), is in a stable tier 1 jurisdiction (tick), and has the potential to be taken over down the track (tick)".

Bottom line is the best will always attract a premium, and I think DEG can now be classed as the best. Over time, passive money will drive this a lot higher.