Lo and behold, my one truly speculative gold play is finally paying off. ANV has reported its first profitable quarter:
Of course, it's just one quarter's numbers, but now there's a factual basis for the faith that I (not to mention George Soros) have placed in ANV. I bought ANV as a new-venture bet on its founders, but now I think I can put my thinking on firmer footing. My confidence in my ability to value established stocks (confirmed by Warren Buffett's purchase of Burlington Northern) leads me to believe I can construct a similar valuation for speculative mining companies.
I will soon begin constructing a formal valuation methodology for mining stocks. The principles are simple: The company's intrinsic value should be the dollar value of recoverable ore in the ground minus the cost of extracting and processing that ore for sale. The details can get complex, so I've got a lot of thinking left to do. I'll let you know when my model is ready.
Nota bene: Anthony J. Alfidi is long ANV (with short puts covered by cash) at the time this post was published.
Allied Nevada Gold Corp. ("Allied Nevada" or the "Company") is pleased to report its financial and operating results for the three and nine months ended September 30, 2009, including its first quarter of positive earnings in the third quarter of 2009. The results presented in this press release should be read in conjunction with the 10Q (third quarter report) filed with SEDAR and Edgar and posted on the Allied Nevada's website at http://www.alliednevada.com/. The financial results are based on United States GAAP and are expressed in U.S. dollars.
Of course, it's just one quarter's numbers, but now there's a factual basis for the faith that I (not to mention George Soros) have placed in ANV. I bought ANV as a new-venture bet on its founders, but now I think I can put my thinking on firmer footing. My confidence in my ability to value established stocks (confirmed by Warren Buffett's purchase of Burlington Northern) leads me to believe I can construct a similar valuation for speculative mining companies.
I will soon begin constructing a formal valuation methodology for mining stocks. The principles are simple: The company's intrinsic value should be the dollar value of recoverable ore in the ground minus the cost of extracting and processing that ore for sale. The details can get complex, so I've got a lot of thinking left to do. I'll let you know when my model is ready.
Nota bene: Anthony J. Alfidi is long ANV (with short puts covered by cash) at the time this post was published.
