Sep
25
2008
I find the ongoing Congressional Hearings interesting both directionally and in the concepts that are being put forward. Having said that, I see this as a time where careful thought and actions are required in place of rhetoric.
The members grilling Messrs. Paulson and Bernanke are clearly unsettled and (in my view justifiably) angry. They can’t figure out why ‘this mess’ has come on them so suddenly. That is a very good question. For years commentators have been talking about the amount of debt both the U.S. and its citizens have been accumulating, the loss of U.S. manufacturing jobs, the use by U.S. Consumers of their houses as their personal ATM machines, and so on. I see the matter at hand in concept as comparatively simple, the devil is – as usual – in the detail.
Having listened to President Bush’s ‘address to the nation’ last evening and reading the latest write-ups on the state of negotiations on the ‘bail-out bill’ before Congress my views first thing Thursday morning are:
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Sep
25
2008
Background to this Series of Posts
This is the 4th in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.
Mining Company Risk Assessment
The following assumes a ‘single project’ company. If a company has more than one project the considerations discussed that are ‘project specific’ need to be considered separately with respect to each project. From an investor perspective important timing issues, risk assessment, company information, and an appropriate ‘risk related rate of return’ ought to be include a large number of common factors. This Post and Posts #5 – #10 of this Post Series discuss many of these factors – in some cases followed by discussion shown in italics. On a cautionary note, ‘Risk Factors’ are fact and circumstance specific, and no list or broad discussion of ‘Risk Factors’ should or can be considered all-encompassing.
General Factors
1. The proper measurement of current business value is the present value of all future returns, where future returns are taken to be after-tax distributable or re-investable (in company growth) ‘free cash flows’. In the context of a mining project ‘free cash flow’ typically include the aggregate after-tax annual cash flow
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Sep
23
2008
Background to this Series of Posts
This is the 3rd in a Series of 17 Posts that will be published on this Blog each Tuesday and Thursday from September 16 to November 11. All 17 Posts will be filed under the Blog Category ‘Valuation of Mining Companies’. For previously issued Posts in this Series click here. We hope you find this Post Series useful.
Exploration & Mine Development
Mining industries and the companies that participate in them face significant risks. These risks relate to:
1. The company’s ability to raise financing as required at reasonable and affordable rates.
2. The company’s ability to find mineralization that can be economically extracted in the contexts of:
• commodity prices both in the context of their cyclicality and the fact a mining company’s price recoveries are market dictated and entirely outside its control;
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Sep
21
2008
Many years ago when responding to a question I said: ‘Old Sayings are Old Sayings because they have stood the Test of Time’. I have never heard anyone else make this observation – although it is hard to believe I could be the first. One ‘old saying’ is ‘Desperate People Do Desperate Things’. I see Henry Paulson’s proposed ‘Balance Sheet Cleansing Plan’ being drafted as this is written (Sunday, September 21) as something along those lines.
In Posts to this Blog on September 13th and 15th I talked about:
1. My concerns with respect to ‘rapid decision making’ on the part of Paulson and Ben Bernanke without them likely understanding all the consequences of their actions.
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