Saturday, October 6, 2012
How many disabling head injuries can you suffer before turning into a respected junior mining stock analyst?
I just looked at that Liberty Silver post again this morning and was stunned after re-reading the writeup from James West.
"The math is very straightforward with Liberty Silver Corp.'s Trinity Project: 50 Moz silver at $30/oz, minus cash costs of $15/oz, equals $750M divided by 80M shares outstanding equals $9.38/share. Chop that in half for the sake of conservativeness, and you still get a price of $4.68/common share outstanding—if they don't drill another hole. . ."?
Is this meant to be serious? We're supposed to calculate a mine's valuation based on ounces in the ground? Can't we do a Net Present Value calc with discount factor, at consensus future silver prices, after funding capex 50% debt/50% equity and diluting the NPV across the capex-diluted share structure?
I mean how fucking hard is it to do this? I can do it in my sleep. They teach it every year at PDAC, it's 1 hour out of a 1-day course. You see how to do it in every PFS. Or why not do a simple cash flow multiple for the target price, if it's too much fucking work to do an NPV? And he doesn't include the warrants and options for this per-share calc: aren't we supposed to visit the company webpage to look up their share structure?
No wonder the "math" was so "straightforward".
People invest their money based on this?
And then there's that "if silver goes to $110 boyoboy this'll be a good stock yessir dadgummit" statement. The ignorant hayseeds on Stockhouse use precisely that argument to justify holding their UC Resources at 4 cents. Go buy 2013 SLV $50 calls if you're so certain.
My god. This is what happens when I stop being drunk. I have to go get drunk again immediately.
UPDATE: now that a certain Rogue Peruvian Blogger has linked to this article in his weekly, I thought I'd give you the links to the other LSL articles of this weekend:
- The stockwatch article;
- Four snarky news releases from Sennen, who LSL tried to buy out;
- James West's LSL writeup was deleted from the Midas Report last night, as well as from the Google Cache; but you can still find it on Before It's News, and a veritable army of evil minions is reposting it everywhere else - and you can too!;
- Here's the delicious irony of James West's recent interview on The Gold Report, a website that needs to be far more picky in the future;
- Oh, and some quotes from The Gold Report, where you'll find other positive assessments of LSL from Jeb Handwerger and David Bond.