CRS 2.08% 23.5¢ caprice resources ltd

valuation of 25c

  1. 934 Posts.
    From todays SMH

    Not nice to undermine a miner
    By James Chessell
    July 12 2003

    Running a mid-sized gold producer in Western Australia is a tough enough job without having to deal with miserly brokers.

    Which brings us to Croesus Mining's Mike Ivey, who has politely disagreed with a recent note penned by the house of Citigroup Smith Barney.

    The trouble is working out exactly how much Croesus's Norseman operations in WA are worth.

    The Kalgoorlie-based company acquired the WMC-controlled Central Norseman and Norseman operations at the start of last year with cash flowing from the Davyhurst project.

    While it's not the easiest project to value, Ivey clearly reckons Citigroup's 25c-a-share number is a little poorly.



    "It's bordering on the ridiculous," Ivey told the website.

    "I don't mind people discounting that, putting some risk on [low reserves], but they shouldn't go to the opposite end of the spectrum and get a 25c valuation without any exploration premium.

    "If retail investors saw that, it could cause them to panic unnecessarily."

    Norseman has always been something of a paradox.

    It has operated for the best part of 75 years despite not much in the way of reserves in front of it.

    Market analysts sometimes have trouble working out Croesus's net present value
    because of its relatively low reserves position, which to some degree puts a cap on its price.

    As MiningNews puts it: "Average annual production for the last 67 years has been 72,000 ounces, however the operations have always been bedevilled by a low reserve base - usually around two to three years - because of the difficulty and cost of drilling the narrow vein structures that host the gold."

    Citigroup does point out that its valuation, using present reserves, is tough on Croesus given that a three-year mine life does not seem "realistic".

    Using more optimistic numbers, the broker comes up with valuations in excess of yesterday's steady 45.5c close.

    Ivey's annoyance is understandable. Croesus shares started the year at well over 90c a share.

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