While I’m on the Gold Bandwagon

26/8/16

Some undervalued Gold Producers

ASX:DRM ASX:RED

I seem to be in some kind of Gold fever

the price of the metal is now in the $ 1330 USD and the AUD is currently buying around 76 US cents, therefore the current AUD gold price is 1740 ish per ounce

we’ve been seeing some dips in the gold price over the last 4 weeks on the speculation that the US febs will raise interest – which would be a bad thing for the gold price as holding gold doesn’t yield any income.

on the back of that I have noticed 2 small cap gold producers drop in Value

ASX:DRM – Doray Minerals

The Stats

Price $0.765
Mkt Cap ~$260 M
Revenue generation: Gold producer

What they do

Produced 80,000 Oz this financial year at Andy Well with costs of $1200 per ounce

Have started producing at Deflector and should be 60,000 Oz

they believe they can achieve Margins of $600 with the current Price of gold

if they can and can achieve their targets of 140,000 oz then they will make somewhere in the order of $84 M
at current Market cap puts them at about 3.09 PE

if we assume they meet targets and will be re-rated to between 8-10 PE (noting the historical ave for the ASX is 15) then they should hit a price of somewhere in the vicinity of $2- 2.50

which on the lower end is a 160% increase on the current price

so might be worth a look

ASX:RED – Red

The Stats

Price $0.12
Mkt Cap ~$100 M
Revenue generation: Gold producer

What they do

Expect to produce 60,000 Oz going forwad with costs of $1200 per ounce

this year they expect to do 80,000 oz @ $1000 per Ounce

If things happen as suggested and if they can and can achieve their targets then they will make somewhere in the order of $56 M this year and $30M not withstanding they are still digging for more

they are also in an interesting jurisdiction in the phillipines and there may be possible risk around geo political instability in the region

at current Market cap puts them at about 3.33 PE on future earnings

if we assume they meet targets and will be re-rated to between 8-10 PE (noting the historical ave for the ASX is 15) then they should hit a price of somewhere in the vicinity of $0.30 -0.36

which at the lower end is a 150% increase on the current price

worth watching

Disclaimer : 

this is my own personal opinion

You should seek professional advice for your own investment decisions

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