compelling value

Recently Kingsgate offered $3.65 per share for Dominion. DOM are currently trading at around $3.30. I like DOM and will consider them on their merits (and SP) early in the new year prior to the shareholder vote.

What has this got to do with RMS I hear you ask? Well after plenty of research I asked myself the following questions:

1) Why would Kingsgate (or similar) look to buy DOM when they could buy RMS?

2) Why would I (or you) park my money in DOM when I could buy RMS?

I consider a takeover as being a very good indicator of the value of a company. Kingsgate would not have taken this decision lightly and the fact that they are experts in the field would mean they know what they are talking about.

Quite often these initial takeover offers are rejected and the target company ups the ante. Based on this I see the offer risng and the SP of DOM also rising in the meantime. Perhaps $4.50 could be achieved. This is significantly higher than the current SP.

Back to the point of all this. Using the above as background, consider the following key comparisons between DOM and RMS.

DOM Current Production = 104 kOz/yr
RMS Current Production = 101 kOz/yr

DOM Market Cap/Production Oz = 3347 A$/oz
RMS Market Cap/Production Oz = 2165 A$/oz

DOM Resource = 1.0 Moz
RMS Resource = 3.4 Moz

DOM Market Cap/Resource Oz = 365 A$/oz
RMS Market Cap/Resource Oz = 64 A$/oz

Note: Figures are as recent as I could source but obviously daily fluctuations imply that these are approximate.

Whilst DOM and RMS both have strong balance sheets, good management and similar current production figures, RMS seems to smash DOM in terms of value. These figures are quite startling, especially when you consider the size of the RMS resource and its future exploration options. The market cap per resource is a key statistic for me especially since a majority of what RMS has is mineable and high grade.

Add to this the fact that RMS has a healthy level of cash and reserves is a nice safety net.

So on the basis of the DOM offer I project that RMS is highly undervalued. I dont even need to get out the calculator but if anyone is curious feel free and please share your results.

If a big player came along and put in an offer for RMS I wonder what it would be? These guys can't stay under the radar for too much longer...