can you value nst?, page-6

The process is straight forward.

Build a table of reserves and resources adding a factor to discount those yet to be proven. (each analyst has their own factors and an assessment of past success) This will give you an expected quantity of gold and the amount of rock to be moved to extract it.

Take the extraction and recovery rates and build a depletion table. For some explorers you can factor in exploration cost and replacement rates to extend your table and mine life for unrevealed reserves. Long lived mines with a track record of replacement fit this description (NST does not)

Cash flow comes from the resulting production, price and cost of production cash and capital. e.g. what does it cost to get to the gold? Most companies take to balance sheet and amortise. For example, if you look at St Barbara, they have a low cash cost but a very high capital cost, to get to the material for mining. Not as pretty as it looks/looked. (Value trap) Relevant because BB originated in that mine I believe. One thing I will say for ST Barbara, while I did not like their accounting disclosures or cost representations, they sure know how to dig a difficult and complex hole and get the most out of it. Great engineers.

Deduct SGA, and discount.

I think realistically they have 10 years at P and A so I would impute assumptions about reserves that get me to that state and adjust them based on news as it flows.

This is a pure cash flow valuation that assumes present value of the future cash flows. Those future cash flows and where they are directed are strategic valuation issues that most fundamental analysts ignore because they cannot be modeled. This is where quality of management and judgement come in.

I have done a few mines such as St Barbara in depth and had a cursory shot at NST. The metrics of my entry point were a no brainer so I have not done the hard yards on this one as yet. I will need to because even if entry is easy, exit can be a challenging decision. If you have a number in mind it takes the emotion off the table. You then just trade the technicals around it.

I would not publish my models on this forum but have considered starting a site.

Keep in mind, that valuation models are dynamic. If I were to assess it at 1.00 today with gold at 1608 and AUD at 1.02 it would change tomorrow and further each announcement confirms, extends or modifies your assumptions about the resource and cash flow.

Anyway, this is how it is done. You can get some of this from brokers reports however, NEVER trust a sell side brokerage report. Only about 5% are ever negative and we all know that the 95% positive reports seldom hit their price targets.

Actually building the model teaches you far more about the company than looking at the model. searching out the inputs focuses the mind on what management has said and what it really means.

Think Buy side, not sell side. Buy side are pro's that make money being right rather than pushing stock (Sell side).