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Msg  63551 of 65647  at  12/3/2010 9:51:09 AM  by

liverless


OGC is cheap compared to its peers

 If you take a look at the BMO gold producer universe, large and mid caps are trading at 12x to 13x forward 2011 and 2012 cash flow (based on 1,200/oz gold in 2011 and 1,100/oz gold in 2012).

If you net out the cash from the market cap, then based on annualizing the Q3 cashflow before items, OGC is trading at around 5x cash flow.  In comparison BMO has:

    - Gammon Gold at 12x cash flow for 2010
    - CGA Mining at 11x cash flow in 2011
    - Goldenstar is at 12.5x cash flow in 2010
    - Aurizon is at $12x cash flow in 2010
    - Alamos Gold is trading at about 20x cash flow in 2010
 
Oceana Share Data
- They have 301M shares outstanding including the convertible and the new issue (229M as of Oct-31-10 plus 33M from Dipido financing plus 39M from convertible)
- the convertible’s are worth A$163M, A$53M of that is convertible at A$4.14, while the other A$110M is convertible at A$3.90
- At the exchange rate of 97cents that is $158M (the conversion is about $4) so the convertible is not in the money
- the new issue is worth $115M and issues 33M shares
- there are another 5M options
- As of Nov 15th they had $165M in cash
- puts the market cap at $890M at current price of $3.40 (I’m not including the convertible because its not in the money)
- Netting out the cash gives you an EV of $725M

Valuation
- based on $35M of cashflow per quarter they are trading at 5.2x cash flow (using the $725M EV)
- with the average 11x cashflow number that most gold producers get, Oceana should have a market cap of $1540M, or $6.50 per share
- They actually generated $40M of cashflow in Q3 which would put them at 4.5x multiple


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Replies
Msg # Subject Author Recs Date Posted
63555 Re: OGC is cheap compared to its peers JustForFun7 0 12/3/2010 11:31:03 AM


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