For the life of me I can't wrap my head around why this company is so unloved. Of course, the publicity job in general by the company has been pretty lackluster but the fact that they will have Twanziga producing by late in 2011 should at least garner some interest in the stock. They are fully funded for the first phase of construction. Only God knows how this management team managed to raise $137m CAD @ $2.05 CAD/share considering the trading action of the last couple years. The stock has been trading well under that offering price since it was completed.
Seems to me that lots of the larger companies should/would like to have a footprint in DRC since it is one of the less exploited/explored countries. Politics are of course a concern but Randgold seems to be moving forward with Kibali and AngloGold has some exploration in DRC as well.
Can anyone provide insight into this story? Are the project economics suspect? Is there anything else I am missing?
It all comes down to value. Since there are so many variables in estimating net and gross income, i just use a simple gross rev. multiplier to Banro's projected annual gross sales/rev. Per yahoo stock screener, the average & median rev. multipler for gold mine stocks is about 5 multiplier (4.4 m & 6.2 avg) based on 21 stocks, it range from 1.75 to 17x but about 80% of stox fell in the 2 to 6x range.
That being said, the company indicates 400,000 oz in about 5 years or about $2.47 ps based on current gold price $1150 oz and 186M in shares.
$2.47 x 5 rev. multiplier = $12.37
You can double that or split that number in 1/2 to reflect the upper and lower end of the price of gold (2x or 1/2 of current pog).
I know this is pretty simple technique and unlikely that most sophisticated analysts wouldn't use this method but it works for me. BTW, company rep martin jones told me they dont anticipate any more issuing of stocks as the cash in hand is enough to see it through Phase 1.
Warmcamp seems to have a pretty good handle on valuing this company. I admit, that i have limited knowledge when it comes to mining stocks and their valuations. I understand cash flow is a big deal, but i'm a little lost on how to value a start-up mininng operation like Banro.
That being said, Banro is one of about 20 stocks i follow, in additon to the 13 that i own. I have been tempted to buy at these prices but waiting to see if gold prices will continue to hold at these levels, in addtion i want to see the completion of the plant. Political unrest is another big unknown but like you said other mining companies seem to be moving forward in the Congo. althoug every now and then you will see where a village has been attacked or some other such non-sense.
Question to Warmcamp and others, what kind of annual cash flow can we expect for BAA once the Tan. (not sure of the spelling) property/mine is up and producing?
First stage of Twangiza mine, using refurbished plant that currently arriving to the site, is supposed to produce around $100 KOz/year. It will likely process ‘good ore’ using relatively cheap crushing+CIL process, i.e. one may expect, at current gold price, around $300/Oz profitability rate (GAAP earnings) and up to $400/Oz free cash flow, i.e. up to $40M/year.
If (big if) everything goes Ok then mine will be expanded, using this cash flow, up to 300 KOz/year production level. Mineral reserves allow achieving and supporting this level; they are very big.
been in this stock for quite a while...everything i can get my hands on looks promising here. that is, all that is in BAA's power to control.
but the area is still unstable...it doesn't get much more unstable than eastern DRC.
true, other miners are in the area, but for BAA this is it. it's all or nothing...Randgold and Anglo will survive regardless of whether they succeed/fail in the DRC. but not BAA.
and the market doesn't seem to be willing to bid up risk in the gold mining stocks enough to filter down to BAA (yet, imho)
seems as simple as that. for a small position in a diversified portfolio i think BAA is a great holding. the next 12 months should be pretty telling...
Oldhickory comments seem to make sense. This is it for BANRO, if Congo DRC fails then BANRO fails. I guess you might say you are investing directly in the CONGO, the most dangerous area in the world. So you're not going to see many takers. I'm guessing even when the T. mine is up and running in full production mode the stock value will be cheap (per multipliers) relative to other gold mining companies throughout the world.
But who knows, the Congo could turn around in a few years if the UN and other world organizations are committed to its stabilization.
From the little info. i know, the northern province (Nora-Kivu) seems to have the bulk of the problems in the eastern Congo while BAA is located in the southern province (Sud-Kivu) where it's a little less dangerous. How much less? I dont know. But others reading this will probably disagree - i'm no expert.
I see where Warmcamp will get out if the stock price is over $2.50. This doesnt inspire confidence Warmcamp.
good luck to all the longies, for me i'm just an obersverer waiting for the right moment (which may never come).