While many will view a share price of $2.90 a reasonable...

While many will view a share price of $2.90 a reasonable valuation (personally still need higher forward nickel prices), this particular valuation is, IMHO, rubbish. I should highlight a couple of reasons for this:

- $2 of the $2.90 valuation comes post year 5 at which point there would be only one operating mine and would require a fair bit of resource conversion etc. Valuation mining companies into perpetuity just doesn't quite work in that way.
- The valuation doesn't attempt to include current net debt etc. (which is positive). The net cash would add circa $0.5/share at present (say $140m/274m shares).
- Imputing a growth rate like 2.6% in a model like this makes no sense. Better to model real cash flows and use a real discount rate....
- to get the early year cash flows a pretty high nickel price must've been used - to the extent that it would require a circa $5.5 average nickel price for the next twelve months to achieve the fcf estimate....
- it's not clear if sustaining capex is included in the fcf.... mining companies have to develop the asset to continue to release the reserves they are mining. It's not like many other companies that ones you have the assets you don't have to spend much to maintain them.

There are so many things with this article that just don't make sense, it pretty much needs to be ignored altogether IMO. This was posted on one of the other threads and I raised the same things there...


DYOR