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To calculate the potential stock price of Aris Mining at $4,000 per ounce of gold, we would follow these steps:
1. Current Production Metrics:
- By the end of 2025, Aris expects to be mining around 450,000 oz annually.
- All-in sustaining cost (AISC) is expected to be around $1,000 per oz.
2. Free Cash Flow (FCF) Calculation:
- At $4,000 per oz, the gross margin would be $4,000 - $1,000 (AISC) = $3,000 per oz.
- Free cash flow per year = 450,000 oz × $3,000 = $1.35 billion.
3. Multiplying by Price-to-FCF Ratio:
- For a mid-tier gold producer, an average price-to-FCF ratio could range between 5 to 10.
- At 5× FCF, market cap = $1.35 billion × 5 = $6.75 billion.
- At 10× FCF, market cap = $1.35 billion × 10 = $13.5 billion.
4. Stock Price Estimate:
- Aris currently has a market cap of $940 million.
- Assuming no significant dilution, the market cap at $4,000 gold could increase to between $6.75 billion and $13.5 billion.
- If Aris' current market cap is $940 million, and the stock price reflects that, we can calculate the percentage increase in market cap and apply it to the current stock price.
- Increase in market cap at the lower end (5× FCF) = $6.75B ÷ $940M = 7.2×.
- Increase at the higher end (10× FCF) = $13.5B ÷ $940M = 14.4×.
So, if the stock is currently trading at, for example, $2 per share, the potential stock price at $4,000 gold could range from:
- $2 × 7.2 = $14.40 (lower estimate)
- $2 × 14.4 = $28.80 (higher estimate).
This would depend on achieving production targets, maintaining the expected AISC, and avoiding significant share dilution or further political challenges.
If the price of gold reaches $4,000 per ounce, Aris Mining could potentially generate around $1.35 billion in free cash flow annually, given their projected production of 450,000 oz and an all-in sustaining cost (AISC) of $1,000 per oz.
Based on a price-to-free-cash-flow (P/FCF) ratio of 5 to 10, the stock price could rise to:
- Low estimate: $31.52
- High estimate: $63.05
This reflects a significant increase from the current stock price of $4.39.
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