Hi. Bit rushed tonight. How did you get your cash flow for RMS? Their cash increased from $50 to $90M and of that $23M came from a capital raising, so they actually made $17M vs NST $181 (cash difference + financing to add on the dividend payment. Aprox free cash flow accounting for what they term capital spending gives RMS $65 and NST $303. I add on exploration spending and investment/ capital spending for significant projects but not sustaining. RMS gets a bonus there because they do not split it as clearly as NST. If you just use their operational cash profit you really miss the picture, and one result can be the the D&A expense you ask about. Instead of expensed as operational cash flow, expenses can be 'capitalised' as an investment, added to the assets, and depreciated over the years. Sometimes (maybe happened for RMS) you also get something where the grade/costs/production changes unfavourably and the asset is worth less than they have booked it. That is why I look more to the cash, and I do my own way to avoid how the company highlights figures, not that they are false, but they tend to highlight the stats that make them look the most favourable.
About Mt Magnet, I only glanced at it as a non event but wasn't it increase 130% to 86koz? Even so that is resources, not even proven, so more work/exploration needed to get to reserves. RMS has 2.1 Moz reserves or 16 years supply so what is 50 or 80koz? Also it was sort of expected. It is good news, but it was not better than expected and I make it less than 5% increase ...
@Tang.
I agree somewhat regarding NST fairly valued and I have agreed RMS is undervalued below 50c, so I am not preferring RMS over NST at their current prices. The argument was not about current prices though. I was saying the following (new line to be clear)
When valuing stocks based on their cash flow, as I described, RMS does not warrant any
price premium multiplier compared with NST, EVN, SBM etc. If anything they get a discount, (size, costs, risk) which is clearly shown in the market prices.
This is referring to their valuations not their current price, which had dropped more in proportion to their cashflow than I had realised. NST gets a premium multiplier over their cash generation because they are forecasting production increases and have more organic growth potential, also the muscle to get bigger and better deals on acquisitions. I think the best acquisition deals will be more than RMS can afford, and at that end of the market there are less buyers so better deals, and NST does not even need an acquisition, and they acknowledge that by paying a good dividend.
Sorry I made the initial mistake with RMS, I have so much I was not really looking at valuing it to buy more. My point should have been more clear. If you value gold stocks on the cash they make and keep (or give as dividends) then I believe you get a closer approximation to the medium term share price action. Don't argue stock like RMS has good management/resources/mojo or other subjective opinions ... deserves a higher price than it's cashflow merits.
(20min delay)