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NGF - Norton Gold Fields

Discussion in 'Stocks I-P' started by Lucstar, Oct 27, 2005.

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  1. Lucstar

    Lucstar

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    Hi guys, man its been long since i've been here. To refresh your memory, im a 16 year old, yr 11 student with a passion for the stockmarket

    Well anyways, since i've last posted, ive been so busy with school, but i've also managed to stay active in the market. Had a couple trades with HDR, MUL (dont ask y i got into it), UNI and most recently NGF (Norton Gold Fields)

    NGF has just recently been floated and personally i believe it has great potential. Will hold through till at least christmas. What do you guys think of it (if you've heard of it that is)?

    Thanks, Kevin
    BTW, its good to be back
     
  2. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: NGF

    Welcome back Lucstar, been wondering where you were!!
    You've probably just missed out on the tipping comp or you could have entered a pick! I haven't been in HDR for awhile and don't know much about NGF, gold price is consolidating again so maybe a run up will help all gold stocks.

    ......actually, I think you do qualify for the comp, min 10 posts and .30 posts per day average look okay for you- note the new rule about not allowing stock below 1c for the comp. See the November comp entry thread for more!
     
  3. Lucstar

    Lucstar

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    Re: NGF

    Thanks RichKid for welcoming me back
    Its funny that u mentioned HDR
    I still remember that stock. My first stock ever!
    You guys still monitoring HDR? Im glad i got out at $2.39
    Doesn't look too bright from here, i'd say
    HDR could be worth considering to get back into tho AFTER its bottomed out. I'll be keeping a close eye on that one
     
  4. RichKid

    RichKid PlanYourTrade > TradeYourPlan

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    Re: NGF

    Hey Lucstar,

    No sweat, good to have 'old' hands back in the fray!

    Yep, just keeping an eye on HDR atm, see the thread for a rough graph from last week, I've made some recent comments.

    I see you picked NGF for the comp next month- why do you think it stands out from the crowd?
     
  5. Lucstar

    Lucstar

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    Re: NGF

    Lol! You're keeping an eye on my movements are you, RichKid? Good to see. Anyways, honestly i doubt that NGF will go anywhere, at least not until Christmas or the New Year. But i mean, im hitting my exam season now and i dont have time to research and find another quality stock. THerefore i just chose one that im most familiar with. Sorry to dissapoint you. Haha
     
  6. stoxclimber

    stoxclimber

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    Stock is rocketing today on insider buying news
     
  7. stoxclimber

    stoxclimber

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    Woah guys.

    I just looked at their second Q activites report and ran some numbers based on their predictions of:
    capital cost of 25MM to build the plant
    180Koz per year
    average cash cost of $346US per oz over 4 years


    and I've disregarded the expansion options.

    Since they only have a 500K oz resource (excluding expansion potential), assume they produce 125Koz/yr and a gold price of $600US/oz

    This gives a margin of $254US/oz

    This gives pre-tax earnings, excluding fixed costs, of just under 40MM AUD!! What are the fixed costs on plants like this? It seems ridiculous for a $5mm market cap company to be pulling 40MM pretax revenue for 4 years
     
  8. stoxclimber

    stoxclimber

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    Sorry guys, one thing I just thought of is that the company is going to have to raise some funds to pay 25MM to construct the plant...and some/most of that would probably be through an equity issue which would dilute the value of the existing shares quite heavily.

    However I was also thinking that the $354US/oz cost may be inclusive of fixed costs (for a plant producing 180Koz/yr) - in which, case, on the companies assumptions and with a 600USD gold price, 80c AUD, tax paid at 30%, 12% discount rate (say 6% rf and 6% market premium, beta=1) assuming the company produces the full 180Koz for 4 years (it will need to get some gold from a place other than the 500Koz deposit for this), at a 12% discount rate the project has an NPV of 91.3M!!

    If we allow the company to raise say, $20M of the 25M from an equity issue at 12c per share thats ~170M shares issued, brinign the total number of shares to ~210MM. Then say they get a 5M financing from a bank a la INL, lets factor in say 500K interest cost per year..giving an NPV of roughly 90M.

    At 210MM shares on issue this equates to a share price of 43c..! not including the expansion options

    NB: Project is also subject to due dilligence and QLD Govt approval.

    I'd love for someone to check over these figures... e.g., does one think the $350US/oz includes the fixed costs of the plant?


    NB: Guys, please don't buy on this analysis...I'm figuring that there has to be something wrong with my analysis for the company to be so undervalued..
     
  9. exberliner1

    exberliner1

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    Stoxclimber.....you forgot the coal.....this will produce a lot of money for NGF as well - that will help pay for the gold scenario.

    I was a big buyer of NGF on Friday (mainly in the 9s)... I will do some analysis on this one over the weekend and try to factor in the coal to make a basic forward cashflow model which can be related back to the share price.

    As it stands with only about 70mn shares in issue of which only 32mn are quoted with the top 20 holding about 70% - there are not many shares out there to buy. On the face of it NGF should go well over 20c next week.

    Did you see all those large bids on Friday afternoon in the 12 - 13.5 range...

    The weather is good in Sydney today so I will not be sitting down with my calculator until tonight...

    Watch this space...

    EB
     
  10. exberliner1

    exberliner1

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    I have been doing some research into NGF and I must admit I like what I see if you take into account the current tiny mkt cap of this company.

    Basic details are:

    Share price at close on Friday – 12.5c

    Shares on issue - 69.8mn
    Options 20c strike price maturity 08.10.10 - 27.94mn

    Now the good bit

    Shares Quoted - 32.35mn
    Options quoted - 8.29mn

    And the even better bit

    In the last top 20 I could find we get the following:

    Shares 72.2% or 50.4mn
    Options 76.44% or 21.35mn

    So that means outside the top 20 there is an absolute maximum of

    19.36mn shares available (about $2.4mn worth at Friday’s close)

    and

    6.58 mn options available

    A recent announcement contained the good news that NGF is taking on the Mount Morgan Gold Project with its potential 500,000 ounces of gold. Of this 221,000ounces is a proven reserve. The other 300,000 ounces are of lower grade although 20,000 tones of copper is also known to be contained in these lower grade areas (see December 2006 quarterly for the full story).

    NGF proposes to produce the first 180,000 ounces of gold at an average cost of US$346 per ounce over the first 4 years of the project.

    Taking a gold price of US$600 this would give positive cash flow over the first 4 years of US$ 45,720,000 (or about $55mn)

    Then there is also the 300,000 ounces of gold contained within the large slag heaps at Morgan which should also be available for recovery along with the 20,000 tonnes of copper mentioned earlier.

    Approvals with the State of Queensland are well advanced by now.

    Payment for the project will comprise
    AU$175k + 10.49mn shares in NGF – so not very much dilution there then.

    The processing plant to isolate the gold will cost about $25mn. But the cost of financing this is already included in the US$346 average cost of recovering the gold. So short term financing will be needed or maybe even a placement of some kind. All of which is good news bearing in mind the obvious profitability of the venture.

    Don’t forget that NGF will also be able to run its produce from the Norton mine through the new processing plant as well giving in effect 2 revenue streams. The processing agreement at Gympie being suspended for the moment (old news from 31st October).

    The whole thing hinges on the price of gold – obviously if you think that gold is heading down below US$346 per ounce then this one is not for you . Or if like me you think gold can only go up from here then the profits for NGF can only increase.


    Coal.

    This side of things id quite interesting.

    NGF,s coal reserves are at Middlemount in the Bowen field - which is basically full of coal.

    Recently Bowen Resources went public and their tenements seem to be literally next door to NGF’s.

    One of the NGF directors – Jack Tan, is also a director of RCI another public coal company. I am wondering if substantial cash could be raised from the Middlemount coal project by selling it….just an idea…. But it would help with the Morgan processing plant.

    The coal reserve at Middlemount does look very good though and Mr Tan seems to have all the right contacts to maximize short term rewards on this front.


    Copper

    In addition the Copper at Morgan NGF also has the Many Peaks Copper Project – initial results from this project have graded in the 1.69% - 3.88% CU …although it is early days yet.


    So if we include the 10.49mn new shares issued to pay for Morgan we get.

    Shares in issue 69.8mn +10.49mn = 80.29mn shares

    Mkt Cap therefore AU$10mn (including the 10.49mn shares not yet issued)

    But only 32mn shares are actually quoted.

    It is irrelevant to include the options and a diluted calculation in this post as the options mature in 3 ½ years and so have no relevance to today’s figures.

    Numbers 19 and 20 of the last top 20 both hold 375,000 shares ( amazing that you can be in the top 20 with a $40k investment) so maybe that 375k sitting at 13c is from one of these two holders. $40k is hardly a cap after all…..if it stays it is good news as it allows some of those who want to buy a larger holding to get on board without chasing the price up – if it goes then there is hardly any sell depth left.

    Fridays trading was interesting

    Opened at 8.1 and steadily went up to 10c and then the following happened – shares traded at each level above 10c:

    10c : 60,000
    10.5c :33,901
    11c : 138,000
    11.5c : 231,038
    12c : 65,000
    12.5c : 285,900
    13c : 329,000
    13.5c : 232,996
    14c : 23,004

    Total volume for the day about 2.8mn

    Conclusion

    The Morgan project, the coal and NGF’s plan for the future means that this company is going places…. Not just drilling holes in the ground and burning shareholder’s money but actually getting to a stage where it will produce many 100s of thousand of ounces of gold.

    The company is totally undervalued at 12.5c

    There are only about 20 mn shares quoted and outside the top 20 worth about AU$2.5mn at Friday’s close. I don’t think they will be at these levels for very long.

    And finally…. Given the increase in trading volumes and the price rise on Friday NGF will be on a lot more watchlists once the market opens on Monday. Very few shares and a lot more people know about it now.

    I would rate it a screaming buy

    I do hold – Dyor…I would be interested in some feedback.

    EB
     
  11. stoxclimber

    stoxclimber

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    hey EB

    good analysis

    just a couple areas to comment on:

    Firstly, the payment for the site also includes a deferred $3M per year over the first 3 operating years of the project (so another 9M off the cash flows) [although its also a tax deduction]

    Secondly, I'm expecting that there will be a placement/equity raising to raise some of the 25MM which will, if the stock keeps trading at this level (which imo is substantially undervalued) shareholder value will be diluted in the equity issue (if e.g. it is at ~15c)...however still a lot of upside in my opinion.

    Lastly, I'm only familiar with the gold project so can't comment on the goal.

    I personally hold a parcel I bought near the top on Friday using T+1 funds, so I may have to sell tomorrow (depending on NGF and the other stocks im holding..as I currently do not have cash to settle)..however I'm looking at acquiring a stake in this, long term.
     
  12. exberliner1

    exberliner1

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    Stoxclimber - I read it slightly differently to you...

    I took "and $3mn deferred payments over the first 3 opeerating years"

    To mean $3mn over 3 years.....thus $3mn in total..

    Surely they would have put $3mn per year over the first 3 ooperating years otherwise.

    Re the coal.....look in the Ann of 14th November and scroll down to Middlemount.....look where it is literally next door to Bowen Energy's tennements.

    I think that we could be hearing something positive about the coal very soon and it might just raise more money than you expect...

    Nice thing about NGF is that short term...today - days there is good profits to be made.... and longer term there definitiely is as well...

    My usual plan to build up a free carried holding and then sit on it should work just fine here..

    EB
     
  13. stoxclimber

    stoxclimber

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    Hey EB
    In a rush at the moment, will read your post later.

    Just quickly dropped by to say:

    Noticed today in the letter to shareholders that they are now talking about a 50Koz/pa plant! Big drop off from the 180K previously discussed..
     
  14. stoxclimber

    stoxclimber

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    Edit, just ran some numbers on the previous assumptions but with a 50Koz/yr plant...significant downwards movement in the valuation! I get a net project value of 38MM (assuming 10 years of mining at 50Koz/yr) and a NGF stock price of 24.5c (assuming 15M raised at 20c a share). Still undervalued but not nearly the same as before..wonder whats caused the company to shift from 180Koz->50koz plant! Some explanation would be nice!
     
  15. stoxclimber

    stoxclimber

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    NB: The valuation of course is highly dependant on the gold price...if one sees gold being above 600 the estimated value goes up sharply..
     
  16. stoxclimber

    stoxclimber

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    encouraging rise today EB (although low volume). the 375K at 13 is a speed bump which will obviously be important in the upside of the share imo
     
  17. stoxclimber

    stoxclimber

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    just an addition since i cant edit..at 650 the valuation is instead 32c a share..if anyone wants the excel model which lets you input various scenarios, PM me your email
     
  18. stoxclimber

    stoxclimber

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    nice rise today on some big buying.

    anyone get on this when i was posting when it was ~9.5c?
     
  19. stoxclimber

    stoxclimber

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    Feel like im talking to myself..
     
  20. AJ_

    AJ_

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    hello,

    i don't hold NGF, but i know someone that does. I have noticed the accumulation over the past few days, so it is on my watchlist...
     
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