Oct
23
2008
Background to this Series of Posts
This is the 12th 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.
Posts #11 – #16 of this Post Series discuss Valuation Methodologies adopted by stock market investors, stock market analysts, corporate acquirers, merger and acquisition intermediaries, and business valuation experts when they value shares in mining companies. In these Posts the following terms have the following meanings, where each is ‘point in time specific’:
1. Enterprise Value: The total value of a business including both its interest bearing debt and equity components.
2. Equity Value: The total value of the shareholders’ equity of a business, where shareholders’ equity is stated at its fair market value, not at its ‘book’ or ‘carrying’ value.
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Oct
22
2008
Like many of you, I spend a great deal of time talking to people. I have the good fortune of having the ear of a great number of thoughtful, interesting people with diverse interests, beliefs and opinions. Here is what they had to say in the past few days:
1. One North Carolinian told me that while there were still lots of people visiting Walmart in her small town, she observed comparatively few were buying.
2. A New Yorker told me that traffic in a high-end mall in his neighborhood was down significantly.
3. A ‘Best Buy’ sales clerk in Toronto told me that customer traffic is down significantly in the store she works in, although she attributed it to seasonality.
4. I have been told that beginning in September Walmart and Sears both began discounting the price of Christmas toys. If that is true it doesn’t auger well.
As I am sure you know, retailers depend on last calendar quarter trade to generate most of their annual profit. The Friday after American Thanksgiving (which always is on a Thursday) traditionally is the largest retail-shopping day in the U.S. If this year that Friday shopping day sees significantly reduced sales, watch out – the ripple effect likely will be something to behold. If you don’t do it on a regular basis, I suggest you do your own ‘consumer spending’ research at a ‘sales clerk’ ‘grass roots level’. I find these people willing to talk openly if questions are asked in a non-threatening way.
The views expressed in this Post are those of the author. They are offered to readers for information and general guidance only. They are neither intended to, nor should be taken to, constitute economic or investment advice. See Legal Disclaimer.
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Oct
22
2008
1. There is daily ongoing talk by any number of economists as to whether the U.S. is in recession. What at these economists thinking? Who is kidding whom? Irrespective of ‘economic modeling’ and historically based ‘measurement of what constitutes a recession as economists assess such things’, as a practical matter I can’t see how the U.S. currently is not in recession based on:
• continued drops in housing prices, foreclosure increases and housing sale stagnation;
• reported lack of consumer confidence;
• the extent of existing U.S. consumer credit;
• bank credit extension issues (read ‘Bail-out Strategy’);
• and so on,
how can the U.S. not be in recession? Moreover, I believe it stands to reason that said recession will deepen before we see improvement.
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Oct
22
2008
1. It apparently has become very difficult to impossible to buy physical gold either in bar or coin form. I was told last Thursday (in separate conversations) by two highly sophisticated Vancouver based investors that they had been unable to buy physical gold for immediate delivery, and that they had to pay for the physical gold they wanted to buy at last Thursday’s spot price plus vendor commission – and that delivery was promised in greater than six weeks. I tested this out last Friday by calling the Toronto Head Office of one of Canada’s largest banks. At 1:30 p.m. last Friday that Bank had a grand total of 17 one ounce gold bars for immediate delivery at the spot price plus vendor commission. Apparently where gold coins can be found they are being bought and sold at significant premiums (antidotally I was told in the order of 30%, although I have been unable to verify this) to the spot price. Finally, it was reported last week (again I have not been able to verify this) that the European Central Banks sold 7.6 tons of gold (about U.S.$250 million)
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