Something Fishy Here!, page-29

@isdhope

welcome.   ncm is my largest holdiing on asx gold currently.

the difference in sp performance is fairly easy to explain - ncm is a proven performer thats now broken out of a 4 yr consolidation pattern - one of the largest gold producers in the world with a very low aisc and getting lower (esp if copper starts to rise as it gets good copper credits from cadia), 30+ year life of mine

historically NCM trades at 20-50% premium to the midcaps - atm its trading 10-40% discount to leading mid cap asx goldies.  that is why its ripping now its broken out. in my view it will be $30 within a short while though probably need to rest a bit soon given how far its come.  but gold market can surprise on that front and need to be about $35 to be fair valued

eg.  i use EV/ gross operating earnings as a shorthand way to assess relative valuation (though one should also consider nta esp life of mine reserves)

NCM  7.0x   aisc $750aud
SAR 11.6x  aisc $1125 but falling
SBM 7.7x aisc $1060
RSG 5.8x  based on 300koz at $1280 aud pog.  but market is discounting it for risk of grade reconciliation etc
NST 8.9x aisc $1025
EVN 9.2x  aisc $900

the lower the ratio the cheaper it is.  the reason i use this metric is it give you pure gross cashflow at an operaing level leaving aside head office etc.  so it tells you relative attractiveness of a mine portfolio to other miners for takeovers etc


So NCM - which you can only really criticise for the png geography of lihir - is almost as cheap as RSG and instead should be about $45 (would put it on 12.7x) to reflect.  If anything the risk is its aisc will fall from here.

vs that rsg is a much soggier story with much higher perceived risk around delivering the target ounces, higher risk locations, smaller output rate etc

rsg really is an overt gold bull market story - which hasnt occurred as yet - or it needs to prove its delivery.

SBM is being discounted for life of mine concerns, EVN should fly because after NCM its th best quality and also has significant debt which rising aud gold price will see paid off quick lowering its EV/earnings as that occurs.  Saracen and NST i would expect to fall back to the pack from here onb a relative basis ( ie bigger gains in NCM and EVN vs the other 2) - though you can never tell when the music will stop for a leading stock in a running trend like aud gold.

algo momentum programs will often run stocks way beyond what any reasonable valuation metric might suggest - AMI i think may be one of those - its valuation is eyewatering to me and its not KLA quality - but it never seems to miss a beat.  Much like GOR has been

most of my decision making is around picking turns in the gold price allocation cycle (ie when to go for aud producers vs say us/canadian) and then picking the stories with most operating leverage and quality. thats how i picked NCM when it finally broke out - you dont get a better gold exposure cheap often - on a relative basis it was like buying NCM in 2015. 

hope that helps