AGO (ASX) How to value AGO

Originally posted by Clements ↑

Can anyone who has bought AGO on a fund. value basis add some thoughts on how they are valuing AGO?

The life of most of AGO's mines is pretty short i.e. less than 6 years, including their new mine. So does that mean, the highest P/E ratio one can apply is 4-6 times? Sure, you could go to 15+ but where is the approved mine life to support this? If yes to say 6 times, then the company is valued at approx. P/E 6 times EBIT or P/E 6 times NPAT . This values AGO - based on the last six months result of approx. $51 million pa and $37 million pa respectively - at .034 and .025 cents, give or take a few .000 points (IO price volatility aside). The fundamental value kicks in when you rate this company on a cashflow basis of approx. net $200 million pa which equals 0.13+ cents. This is how they are currently tracking and why I'm holding - based on this last scenario. The problem with this valuation, all things being equal, is that the company's value drops right down on conversion of the 6.25 billion options in June and July. Yes, they can spend that converted money or invest it but that may add only another $25+ million in fixed income against a massive dilution. My view is this will stay under 7.5 cents until after August which is why the larger holders are happy to lend out to shorts and earn some extra cash - they don't really care because they can't afford for the options to get into the money & they may not even want to spend the extra money to convert even if it was above 7.5 cents. And as each year goes by the P/E drops unless they open up new mines at with CAPEX. Granted, the maths is pretty basic and rounded up and down but all thoughts welcome. I'm looking for reasons to value AGO beyond a 6 year horizon and P/E of 6?

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Just taking your figures of 6.25 billion options at an exercise of 7.6 cents - assuming all are exercised that is a cash injection of $468.75 Million. Very different to you figure of about $25 Million. Am I missing something?

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