The story is even more compelling if a EV/earnings measure is used, given that all but a small proportion of TRY's current mcap is cash backing.
So we get, (just on the gold production), an EV of $15m (mcap $75 - $60m cash), divided by the profit (call it $20m to be more conservative)
EV/earnings of 0.75. The EV value of the company will be returned in NPAT in less than a year.
The TRY's iron ore revenue won't quite be as high as it would have been 6 months ago, but NONE of the above includes any iron ore profits. They are a basically free by-product, (for a notional $5m CAPEX).
And on the qualitative side of the analysis, TRY have a solid track record of mine development (not to mention investment and disposal of assets), which significantly de-risks their current mine expansion. These guys are NOT novices.
And, with other commodity prices tanking, input costs such as labour, equipment and fuel are at least cooling, if not dropping in absolute terms, which takes the pressure off the cost side of the equation.
And the strategic value of TRY's cash cannot be under-estimated. In the current environment, cash has a greater value than usual, and any investment TRY makes is likely to be strongly value accretive.
IMO, the gold sector is likely to outperform (as the fundamentals have improved at the same time as share prices have dropped), and within that sector, it is hard to find many better buys than TRY.
TRY Price at posting:
99.9¢ Sentiment: ST Buy Disclosure: Held
