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mike97

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Imagining Mcfaulds Lake valuation

posted on Mar 24, 2008 07:39AM

Got stopped out on a silver play last Thursday, so was looking to rebalance my McFaulds Lake plays - where I am in everything except KWG and UC. I am a little low on SPQ so was trying to justify the purchase even though it has over 300 million shares out. Much to my suprise when I "bought out" the McFaulds Lake plays for $18B ($10B to NOT and $1B each to the others), because of the low market caps - PRB, KWG and SPQ looked good. So I bought some more PRB and SPQ this morning and am relooking at KWG. Apologies for the math if I have made mistakes.

McFaulds Lake Valuation Let us hypothesize that the following Mcfauld’s Lake companies get bought out for $18B. This is not an unreasonable valuation given Voisey’s Bay initial valuation. Since we don’t know which anomalies will be the best, lets for the sake of argument say NOT gets $10 B and the others get $1B each. Which investments would give the greatest ROI. My first thought would be NOT followed by those with the lowest outstanding number of shares and share price. Let’s do some rudimentary calculations and add $1B to each company’s market cap and $10 B to NOT. Apologies for the math if there are mistakes.

Stock	M Shares	SharePr. Mar 21	Market Cap	Add $1B or $10B	New SP	Gain
FNC	27.5	2.54	69.85	1069.85	38.90	15 x
PRB	23.9	0.78	18.64	1018.64	42.62	54 x
NOT	125.6	5.30	665.70	10665.7	84.92	16 x
SPQ	301.6	0.115	34.68	1034.68	3.43	30 x
BMK	137.2	0.42	57.62	1057.62	7.70	18 x
FWR	166.8	0.36	60.05	1060.05	6.35	18 x
TME	67.9	0.59	40.06	1040.06	15.32	26 x
UC	106.2	0.34	36.11	1036.11	9.76	28 x
KWG	244.6	0.095	23.27	1023.27	4.18	44 x