Following a reading of the latest Bridge Street report, can people please give me a few of the counterarguments to stop buying this stock?
I’m already over-concentrated in GCY, way beyond what I would normally apportion in my portfolio. But it still looks like a buy to me… or am I suffering from a nasty bout of premature speculation?
Let’s take three data points from the Bridge Street analysis (they’re probably paid to do the research, I admit)
• GCY cash, about $34m
• Present value of GCY tax credits, about $48m
• Replacement value of the mill, about $75m (‘quite possibly a 50% discount to replacement value’, Bridge Street says)
That’s $157m in valuation (on a conservative estimate of the mill’s value)
GCY’s current market cap? $232m
For the sake of a quick and dirty valuation, let’s now forget all the other ounces that GCY has outside of Never Never (another 1.2m ounces!). So just use the Never Never inventory of 721,000 ounces.As is, Never Never is being valued at about $75m, or about $104 an ounce.
But RMS just paid more than $200 an ounce for MGV.
As Bridge Street notes, if you factor in GCY’s full inventory of ounces, the company’s EV/resource ounce drops to $69/oz, a 66% discount to the MGV valuation.
I understand the dangers of drinking the Kool Aid on your investments (I’ve done it myself a few times). But GCY still looks significantly undervalued, all the more so if the talk coming out of the company on the new targets comes to any kind of fruition.
Even if they find nothing more (how likely?), there is room to run.
Why has the market been slow to react? I thought the media commentary on the brokers not getting their fill (so they won’t cover/promote GCY as an investment) was interesting. Tembo got a great deal, but it has meant we stayed away from the brokers and all the bullshit on cut-price offers to ‘sophisticated’ investors. Also, it looks like GCY could fund the restart of the mill with debt, so the brokers won’t get a look-in there either. Maybe GCY’s former reputation has kept it off the radar too. As well as its market cap – it was previously too small to attract professional money.
But has this given us poor, put-upon retail investors the chance of a lifetime to get into something special?
Four quick beers says yes. I effing hope so.
Finally, a thank you to the analytical posters on the GCY threads on Hot Copper. They know who they are: some give bigger-picture analysis, some are more specific in their expertise, some do both.
If things continue to go the way I hope, we will soon be deluged in less informed commentary…. But the long termers have kept me interested in GCY since I first bought in hoping to make a quick profit on the WGX takeover bid. SL (and our own board) effed that up (it seemed at the time) and I was furious. Fortunately, the GCY geos discovered NN and I decided to hang around a bit longer. Confidence grew and I bought more shares. Then they shut down the plant and it was back to being effed off again.
But (at the danger of sounding over-optimistic again), the hanging around and doubling down has given me a meaningful position in the stock, as I hope it has done for others.
It would be great to stick it to the experts for once and grab more of the gain ourselves (and please note GCY board and management, some of us have been around longer than you, don’t deny us our fair share).
(20min delay)