Just wondering what people are thinking about this stock. Any reason that it is trading at such a discount? Is it simply the production downgrade? Or because markets are bearish on the gold price? Do people have a problem with management?
I’m convinced that they are going to be a great long-term bet. Soon they will lock in financing for KOTH. Gold miners typically trade 5-8x EV/EBITDA, RED5 are currently at 6.7x EV/EBITDA, even with their growth story. The development of their mine is highly likely at post-tax IRR of 64% and as such stock is not priced appropriately. They have a backable feasibility study and are already developing mine expansions. Net debt is ($70m).
If they are at year 1 production, 3x current production, in mid-CY22. This will move their EBITDA from ~$44m LTM, to ~$190 run-rate conservatively as the new mine will have a much lower AISC to mine and some scale effects. If you build some scenarios around the gold price for this and I’m still pretty confident. In a world where they don’t pull off mine expansion it tanks but in the world where they achieve the mine build-out I see a EBITDA multiple at say todays 7x and you can do the math on TSR (5-6x in this scenario). So look I think there’s a lot of room to move here for the gold price downward, but I kind of believe I will do at least ok. Seems like a good story right?
Figure1: AUD gold prices could come off 15% and project still has a pre-tax IRR of38%
Figure2: Today St Barbara has a 3x market cap on RED, and Westgold a 2.3x
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Last
42.0¢ |
Change
0.010(2.44%) |
Mkt cap ! $2.857B |
Open | High | Low | Value | Volume |
42.5¢ | 43.0¢ | 40.5¢ | $55.01M | 131.2M |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
3 | 136340 | 41.5¢ |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
42.0¢ | 2109264 | 10 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 7000 | 0.415 |
13 | 1169201 | 0.410 |
13 | 693056 | 0.405 |
32 | 717472 | 0.400 |
10 | 272292 | 0.395 |
Price($) | Vol. | No. |
---|---|---|
0.425 | 259421 | 6 |
0.430 | 1643108 | 11 |
0.435 | 476739 | 8 |
0.440 | 311233 | 11 |
0.445 | 481551 | 8 |
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