To estimate the potential stock price for Gowest Gold based on their Bradshaw project, we’ll analyze projected production, costs, potential free cash flow, and market valuation.
Step 1: Production Forecast and Revenue Calculation
1. Projected Production:
- Initial Production: 25,000 oz in the first year.
- Target Production: 90,000 oz by Year 4.
2. Projected Revenue:
Assuming a gold price of $4,000 per oz:
- Revenue Calculation at Full Production:
Revenue=Total Production×Gold Price=90,000 oz×4,000 USD/oz=360,000,000 USD\text{Revenue} = \text{Total Production} \times \text{Gold Price} = 90,000 \, \text{oz} \times 4,000 \, \text{USD/oz} = 360,000,000 \, \text{USD}Revenue=Total Production×Gold Price=90,000oz×4,000USD/oz=360,000,000USD
Step 2: Cost Calculation
1. Assumed Cash Costs:
For the purpose of this estimate, let's assume cash costs around $1,000 per oz (this is a rough estimate; actual costs could vary based on specifics).
- Total Costs:
Total Costs=Total Production×Cash Costs=90,000 oz×1,000 USD/oz=90,000,000 USD\text{Total Costs} = \text{Total Production} \times \text{Cash Costs} = 90,000 \, \text{oz} \times 1,000 \, \text{USD/oz} = 90,000,000 \, \text{USD}Total Costs=Total Production×Cash Costs=90,000oz×1,000USD/oz=90,000,000USD
Step 3: Free Cash Flow Estimation
1. Free Cash Flow Calculation:
FCF=Revenue−Total Costs=360,000,000−90,000,000=270,000,000 USD\text{FCF} = \text{Revenue} - \text{Total Costs} = 360,000,000 - 90,000,000 = 270,000,000 \, \text{USD}FCF=Revenue−Total Costs=360,000,000−90,000,000=270,000,000USD
Step 4: Valuation Based on FCF
Using a 10x multiple on free cash flow for valuation:
Market Cap=FCF×10=270,000,000×10=2,700,000,000 USD\text{Market Cap} = \text{FCF} \times 10 = 270,000,000 \times 10 = 2,700,000,000 \, \text{USD}Market Cap=FCF×10=270,000,000×10=2,700,000,000USD
Step 5: Estimate Stock Price
Assuming Gowest Gold has approximately 500 million shares outstanding (please adjust based on actual share count):
- Stock Price Calculation:
Stock Price=Market CapShares Outstanding=2,700,000,000500,000,000≈5.40 USD\text{Stock Price} = \frac{\text{Market Cap}}{\text{Shares Outstanding}} = \frac{2,700,000,000}{500,000,000} \approx 5.40 \, \text{USD}Stock Price=Shares OutstandingMarket Cap=500,000,0002,700,000,000≈5.40USD
Conclusion
If Gowest Gold successfully ramps up to an annual production of 90,000 oz at a gold price of $4,000 per oz, the estimated stock price could be around $5.40 per share. This reflects significant upside potential, particularly if they can achieve their expansion goals and if exploration leads to increased resources. The company’s current low valuation suggests a possible rebound if they can stabilize operations and improve investor confidence.
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Disclaimer
The user RockeTeller has a position in TSXV:GWA. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.