NOTE: This project is purely to apply concepts that I have learned from courses and certifications completed and not a formal, independent analyst opinion of any kind.
Find the model here. Any feedback is welcome.
Overview
Another DCF repetition turning the CMM three statement model into a DCF as well. Not necessarily any iterations, just more mechanical reinforcement putting a DCF together.
Please note this does not utilise a life of mine model, I’m either using growth rates and ratios based on historical financials or making up certain assumptions to have numbers to play with.
Takeaways
- Based on the assumptions made inherent to the three prior year financial statements, it spat out a negative terminal value again. This time driven by the massive growth rate of revenue period on period. I think this has just outpaced every other FS lines’ growth which has made that growth rate so high which then exceeds WACC resulting in the final year’s cash flow over a negative rate in the terminal value perpetuity calculation.
- Similarly, I think this is why the DCF valuation ranges of ~$20 – 30 per share are so high compared to the 52 week trading range. That revenue growth is just driving much higher cash flows in this model. I would assume that in practice their operations would eventually reach a limit, such that this kind of growth could only come from significant commodity increases rather than increasing quantity. That would kind of cap the potential valuation based on their current operations without significant expansion capex to allow that much growth barring a massive copper run. That’s probably factored in to some extent by the market and that’s resulted in the difference in ranges here.