because you guys are just better at this than I am
Let's say we find a producer of gold. And this producer is digging up 50,000 ounces a year.
Sure, there's lots of variables, but suppose we use a number, let's say $1,500 per ounce they realize from sales.
$1,500 X 50,000 = $75,000,000 in sales.
What is the company worth, more or less, within a nuclear detonation?
There are precious few that will realize 1500 $ per month after all costs are in .
Figuring gold miners valuations just on production seems to be a mostly pointless endeavor, since there are so many other variables as you point out.
Management is a big factor, some ( like UXG) will get a huge valuation just on who is running the show.
Cash in the bank versus debt is another factor in valuations, and metal value in ground.
One company I have followed is TVI Pacific , and even tho they are a profitable miner they get little valuation since their resource is running out and exploration has not shown more economic ore for growth, or continued mining.
I also like and follow OGC , who have 260 ,ooo ozs of gold annual production and are profitable but get a poor valuation for some reason, i think some of it because they are expanding in the Phillipines , ( which is where TVI is ) OGC's Didipio project there looks great tho and cash costs are projected to be negative for gold, ( meaning all mining costs will be paid by the copper produced alongside the gold.
Management not well known or proven with OGC and perhaps another reason why their valuation is so low.
Osisko in Canada has a 5.3 BILLION $ market value, however they have to have profitable gold production. They are forecasting big production tho and profits and have some substantial low grade resources.
Are they worth 10 times more than OGC?, Personally i dont think so.
Metal value in ground they are near the same, Productionwise OGC right now is miles ahead, but OSK projected to have more very soon.
Canada compared to the Phillipines , as far a jurisdiction to be mining in, is considered a big plus for OSk.
Lots to consider when looking at the actual producers, and i have found that production and resource numbers do not always make for a good buy, but that is a good place to start your dd.
mouser is right, there are soooooo many other variables it boggles the mind. And so many are completely unquantifiable.
Faith in management.
Belief in the long term ability to grow production.
The Odds of hitting a big discovery.
Comfort Level with the local political jurisdiction.
It goes on and on. You just have to look at a lot of companies and start to get a feel for why some seem so highly valued as compared to some others. What does the market reward, what does it penalize? It's maddening. Even when you are completely convinced that the market has something wrong, it can stay wrong for an insane amount of time.
Sorry I'm not really being much help here.
I'm thinking comparables, just like they do for a real estate appraisal. They find two or three other homes and recent sale prices, then adjust because one has a bigger yard, one has a few more square feet, one has a finished basement, and try to say well then yours should sell for $XXX.
So with the miners maybe you see several that produce in a similar range, and see what the market says they are worth. But you are analyzing another similar one and you are trying to see if it's a great value right now because it seems cheaper. Why is it cheaper? Is it in what is perceived as a risky country? Has there been labor problems lately? Costs running high? Is the deposit depleting with no sign of finding more ore? All kinds of things.
Or maybe you are looking at a group and wondering why is one so high? Market seems to think the CEO is a superstar and they want of piece of it. Maybe they are really hitting some big drill holes and it's clear they are on to a big find. There's a bunch of growth in production coming next year. One is in Ontario, one is in Peru. One owns their own mill, one has to truck a bunch of concentrate a few hundred miles away. One seems to never miss on tonnage, grade, costs, etc, while another has a new excuse to tell every quarter. On and on it goes.
You just try your best to find one that you think the market should revalue a little higher somewhere down the line. And you need to figure that out before everybody else does too. Oh, and you might be wrong and the market might be right. :(
I appreciate what ya'll are saying. I get it, but perhaps I will never understand it, except to say that it is what it is and it ain't what it ain't.
Suffice it to stand that there just ain't no 'back of the cocktail napkin' way to do any down and dirty approximation.