re: News: Generating returns without market r... Baggins, I have...

re: News: Generating returns without market r... Baggins, I have tried crunching these figures before, but just like you it doesn't seem right that AGO is much lower with respect to BCI. Below is a very simplified approach at calculating a share price that I believe AGO should be using BCI as a reference.

Assuming the costs to produce the Iron Ore are similar and they are comparable according to the half yearly reports, and BCI Share price is $4.69 with Market Cap. of 590.38M and Shares Outstanding of 124M

AGO is $0.985 with a Market Cap. of 888M and Shares Outstanding of 915M

Then, with respect to the No. of shares, the ratio between AGO and BCI is
915/124 = 7.37

Divide BCI share price by this ratio
4.69/7.37 = $0.636

AGO is producing twice as much Iron Ore as BCI so
0.636 x 2 = $1.27

This is the approximate price that AGO should be when using BCI as a reference. Of course there are other things to consider such as BCI are on rail at the moment and AGO are not. Also BCI are paying a much better Dividend i.e. BCI 7% compared with AGO 3%. There are other variables too which I haven't mentioned, as I said this is an approximate value, but does show that AGO is undervalued by 20 - 30%.
I'm sure other minds better than mine that can have a go at this and come up with another comparison.