Hello doodgy11: I always use a understandable framework, based on cashflows, to come to a fair value calculation. For FY2020 they expect to produce 340.000 to 370.000 OZ, growing towards 400.000 OZ in the next 3 yrs. So for my calculation I use 360.000 OZ to be conservative. The AISC is around A$ 1.165. With a POG of around A$ 2.140,- this means a gross margin of A$ 975,- per OZ.With an expected production of 360.000 OZ the free cashflow will be 360.000 x 975,- = A$ 351 mln. There are 508 mln.shares outstanding so the free net cashflow (working with a tax-percentage of 25%) of 0,75 x 351 = A$ 263 mln has to be divided by 508mln: 263/508 = 52 cts per share. There is also a net cash position of A$147 mln. This means 147/508 = 29 cts per share.
The cashflow yield I would like to have on a company like RRL (taking into account balancesheet strenght, LOM, size etc.) is 9% per annum. This means a cashflow-ratio of 100/9 = 11 times. So a fair value for RRL is for me: 11 x 0,52 = A$ 5,72 plus the free cash per share of 29 cts (there is no debt outstanding), bringing the total fair value to 5,72 + 0,29 = A$ 6,01. If the POG changes you can make the calculation again. I know that AISC is a concept that is rather new and it is a simple measurement, but I like it and use it.
Because RRLis such a fine dividendpayer I always check my fair value with a normalised dividendyield calculation. For goldminers a normal dividendyield is around 2%. By RRL it is almost 4%. So if the yield would normalize than the shareprice would be (with a dividend of 16 cts) 16 cts x 50( 50 x 2 = 100%) = A$ 8,-. So for me the valuation bandwith is A$ 6 to 8,-. To be realized in the next 3 yrs.
I hope this answers your question/
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