The proposed Mutiny Gold - Doray Minerals merger is testing the view that two sick patients can become one healthy patient

John Robertson

PortfolioDirect

The proposed Mutiny Gold - Doray Minerals merger is testing the view that two sick patients can become one healthy patient. At the heart of the transaction is frustration that a company with a project supposedly worth more than $100 million only has a market value of $20 million. The upcoming PortfolioDirect review of Mutiny Gold highlights some reasons for the disparity. One is a deep-seated cultural failing within the gold mining industry: investors will never see the cash flows that are supposed to make up the $100 million. The PortfolioDirect valuation analysis points to the Mutiny Gold shareholder losing value in the transaction. Nor does the market re-rating argument hold up. All five of the companies identified as peers and valuation benchmarks for the new entity have potentially far longer mine lives. The attached chart shows the relationship between operational life and market value for these companies. The newly combined entity (shown in the red marker) will sit very near the average without any alteration to existing market values.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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