APRIL 30, 2013
Adam P. Graf, CFA, Managing Director
Misha Levental, Associate
By separating value and leverage, investors have a more complete method for choosing stocks that offer one, the other, or both. Additionally, investors can evaluate the cost of each.
Value – The difference (or discount) between the market price and the ultimate intrinsic value of an asset at current commodity prices.
Leverage – The change in intrinsic value directly associated with the price movement of an underlying commodity.
NAV Methodology – Discounted cash flow method used to determine the intrinsic value of a company from the valuation of its assets at current commodity prices. By constructing commodity price matrices, leverage to underlying commodities can quickly be determined and compared. NAV can accommodate all significant variables and thus offers a more complete analysis than simple ratios (e.g. ounces of gold per share).Determining Value and Leverage
“Major” and “Mid-Tier” miners trade at a higher P/NAV than single asset plays (“Juniors”) or development plays (“Emerging Miners”)
“Seniors” or “Majors”, &
Dynamic NAV methodology, with market based inputs allows for asset and equity valuation in the context of the current market.
Only by using this method can value be separated from leverage, allow both to be quantified and ranked.
By determining fundamental (or intrinsic) value for each asset, can fair-market value be projected over time using a schedule of catalysts.
Advanced computing power allows for the use of increasingly sophisticated dynamic NAV models – which replace the need to use arbitrary conservative inputs (non-market derived) for prices or discount rates to evaluate risk.Valuation Trends
Risk-Off in Gold Equities – Producers vs. asset and equity valuation in the context of the current market.Pre-Producers
Investors shunning any hint of risk.
Major Risks Concerning Investors & Acquirers
Large Producers have been punished for making acquisitions or aggressively executing project pipelines, then falling pray to these risks.Current Investment Trends