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.
AGO Price at posting:
98.5¢ Sentiment: Buy Disclosure: Held