Tuesday, January 24, 2006
Putting A Price On Mining, Exploration Stocks
Paul van Eeden discusses how to put a price on two types of metals firms. "Commentary to address; this week is part one: Valuing Mining Stocks. Mining is a finite business. Mineral deposits contain a certain amount of ore and when that ore is mined out the deposit is depleted, no matter what you do or wish."
And in the second part, he looks at exploration. "Exploration companies don't have assets, cash flow or earnings. They typically only have a management team, sometimes a bit of cash, and one to several properties."
"The cash will get spent, usually a lot quicker than anticipated. Their projects aren't assets: they are liabilities where the cash is going to get spent. That leaves us with management, and management is absolutely an exploration company's biggest asset, if not its only asset. Promoters of these stocks will tell you their company's management has a superb track record, but the reality is that there aren't even enough mediocre management teams to run the thousands of exploration companies resident in Vancouver alone."
"If an exploration company's only asset is management, how do we put a value on it?"
And in the second part, he looks at exploration. "Exploration companies don't have assets, cash flow or earnings. They typically only have a management team, sometimes a bit of cash, and one to several properties."
"The cash will get spent, usually a lot quicker than anticipated. Their projects aren't assets: they are liabilities where the cash is going to get spent. That leaves us with management, and management is absolutely an exploration company's biggest asset, if not its only asset. Promoters of these stocks will tell you their company's management has a superb track record, but the reality is that there aren't even enough mediocre management teams to run the thousands of exploration companies resident in Vancouver alone."
"If an exploration company's only asset is management, how do we put a value on it?"
# posted by Ben Jones @ 9:07 AM 
Comments:
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Which is why MNEAF is a great little company. Very seasoned mgmt. & Former CEO of Goldcorp is on the board. (Very volatile little stock though at .62 cents ... it swings all over the place.)
sd cdl,
The way I use gold mining stocks is as a speculative portion of my gold allocation. These stock will go up or down more than the physical metal. I keep the stock unless something changes with the outlook.
I wish there was a mine that paid a dividend in gold!
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The way I use gold mining stocks is as a speculative portion of my gold allocation. These stock will go up or down more than the physical metal. I keep the stock unless something changes with the outlook.
I wish there was a mine that paid a dividend in gold!
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