Intrinsic value of Lundin Mining Corporation - LUN

Previous Close

$7.16

  Intrinsic Value

$1.43

stock screener

  Rating & Target

str. sell

-80%

Previous close

$7.16

 
Intrinsic value

$1.43

 
Up/down potential

-80%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LUN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -9.18
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  2,088
  3,341
  5,162
  7,719
  11,200
  15,802
  21,724
  29,159
  38,288
  49,267
  62,229
  77,274
  94,475
  113,874
  135,487
  159,309
  185,315
  213,467
  243,721
  276,026
  310,336
  346,604
  384,792
  424,873
  466,828
  510,650
  556,345
  603,933
  653,444
  704,925
  758,433
Variable operating expenses, $m
 
  3,750
  5,786
  8,647
  12,540
  17,686
  24,309
  32,625
  42,835
  55,114
  69,610
  86,422
  105,660
  127,356
  151,528
  178,170
  207,254
  238,740
  272,575
  308,705
  347,076
  387,638
  430,348
  475,174
  522,096
  571,106
  622,211
  675,433
  730,806
  788,382
  848,225
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  1,752
  3,750
  5,786
  8,647
  12,540
  17,686
  24,309
  32,625
  42,835
  55,114
  69,610
  86,422
  105,660
  127,356
  151,528
  178,170
  207,254
  238,740
  272,575
  308,705
  347,076
  387,638
  430,348
  475,174
  522,096
  571,106
  622,211
  675,433
  730,806
  788,382
  848,225
Operating income, $m
  337
  -409
  -625
  -928
  -1,340
  -1,885
  -2,586
  -3,466
  -4,547
  -5,847
  -7,381
  -9,149
  -11,185
  -13,482
  -16,040
  -18,861
  -21,940
  -25,273
  -28,854
  -32,679
  -36,741
  -41,035
  -45,556
  -50,301
  -55,268
  -60,456
  -65,866
  -71,500
  -77,362
  -83,457
  -89,792
EBITDA, $m
  925
  522
  806
  1,205
  1,749
  2,467
  3,392
  4,553
  5,979
  7,693
  9,717
  12,067
  14,753
  17,782
  21,157
  24,877
  28,938
  33,334
  38,058
  43,103
  48,460
  54,124
  60,087
  66,346
  72,897
  79,740
  86,876
  94,307
  102,038
  110,077
  118,433
Interest expense (income), $m
  101
  101
  284
  551
  925
  1,435
  2,109
  2,976
  4,064
  5,401
  7,008
  8,905
  11,108
  13,626
  16,466
  19,631
  23,118
  26,925
  31,047
  35,476
  40,205
  45,228
  50,538
  56,129
  61,997
  68,139
  74,554
  81,244
  88,211
  95,459
  102,996
Earnings before tax, $m
  173
  -510
  -909
  -1,478
  -2,265
  -3,319
  -4,694
  -6,441
  -8,611
  -11,247
  -14,389
  -18,054
  -22,293
  -27,108
  -32,507
  -38,491
  -45,058
  -52,198
  -59,901
  -68,155
  -76,946
  -86,263
  -96,094
  -106,430
  -117,265
  -128,595
  -140,420
  -152,744
  -165,573
  -178,916
  -192,788
Tax expense, $m
  6
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  -894
  -510
  -909
  -1,478
  -2,265
  -3,319
  -4,694
  -6,441
  -8,611
  -11,247
  -14,389
  -18,054
  -22,293
  -27,108
  -32,507
  -38,491
  -45,058
  -52,198
  -59,901
  -68,155
  -76,946
  -86,263
  -96,094
  -106,430
  -117,265
  -128,595
  -140,420
  -152,744
  -165,573
  -178,916
  -192,788

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  966
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  8,299
  11,722
  18,111
  27,084
  39,298
  55,444
  76,223
  102,313
  134,344
  172,868
  218,346
  271,137
  331,490
  399,557
  475,395
  558,980
  650,227
  749,007
  855,160
  968,513
  1,088,897
  1,216,153
  1,350,149
  1,490,784
  1,637,993
  1,791,754
  1,952,088
  2,119,062
  2,292,787
  2,473,423
  2,661,169
Adjusted assets (=assets-cash), $m
  7,333
  11,722
  18,111
  27,084
  39,298
  55,444
  76,223
  102,313
  134,344
  172,868
  218,346
  271,137
  331,490
  399,557
  475,395
  558,980
  650,227
  749,007
  855,160
  968,513
  1,088,897
  1,216,153
  1,350,149
  1,490,784
  1,637,993
  1,791,754
  1,952,088
  2,119,062
  2,292,787
  2,473,423
  2,661,169
Revenue / Adjusted assets
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
  0.285
Average production assets, $m
  4,415
  7,062
  10,911
  16,318
  23,677
  33,405
  45,924
  61,643
  80,941
  104,151
  131,551
  163,357
  199,720
  240,729
  286,420
  336,780
  391,756
  451,270
  515,225
  583,520
  656,049
  732,720
  813,451
  898,182
  986,874
  1,079,514
  1,176,113
  1,276,713
  1,381,381
  1,490,212
  1,603,328
Working capital, $m
  2,773
  1,670
  2,581
  3,860
  5,600
  7,901
  10,862
  14,580
  19,144
  24,634
  31,114
  38,637
  47,237
  56,937
  67,744
  79,655
  92,657
  106,734
  121,860
  138,013
  155,168
  173,302
  192,396
  212,437
  233,414
  255,325
  278,173
  301,966
  326,722
  352,463
  379,217
Total debt, $m
  1,329
  3,740
  7,248
  12,174
  18,880
  27,744
  39,151
  53,475
  71,060
  92,210
  117,177
  146,159
  179,293
  216,662
  258,297
  304,185
  354,280
  408,510
  466,788
  529,019
  595,109
  664,973
  738,537
  815,745
  896,563
  980,978
  1,069,001
  1,160,670
  1,256,045
  1,355,214
  1,458,287
Total liabilities, $m
  4,024
  6,435
  9,943
  14,869
  21,575
  30,439
  41,846
  56,170
  73,755
  94,905
  119,872
  148,854
  181,988
  219,357
  260,992
  306,880
  356,975
  411,205
  469,483
  531,714
  597,804
  667,668
  741,232
  818,440
  899,258
  983,673
  1,071,696
  1,163,365
  1,258,740
  1,357,909
  1,460,982
Total equity, $m
  4,275
  5,287
  8,168
  12,215
  17,724
  25,005
  34,377
  46,143
  60,589
  77,963
  98,474
  122,283
  149,502
  180,200
  214,403
  252,100
  293,253
  337,802
  385,677
  436,800
  491,092
  548,485
  608,917
  672,344
  738,735
  808,081
  880,392
  955,697
  1,034,047
  1,115,514
  1,200,187
Total liabilities and equity, $m
  8,299
  11,722
  18,111
  27,084
  39,299
  55,444
  76,223
  102,313
  134,344
  172,868
  218,346
  271,137
  331,490
  399,557
  475,395
  558,980
  650,228
  749,007
  855,160
  968,514
  1,088,896
  1,216,153
  1,350,149
  1,490,784
  1,637,993
  1,791,754
  1,952,088
  2,119,062
  2,292,787
  2,473,423
  2,661,169
Debt-to-equity ratio
  0.311
  0.710
  0.890
  1.000
  1.070
  1.110
  1.140
  1.160
  1.170
  1.180
  1.190
  1.200
  1.200
  1.200
  1.200
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.210
  1.220
Adjusted equity ratio
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451
  0.451

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -894
  -510
  -909
  -1,478
  -2,265
  -3,319
  -4,694
  -6,441
  -8,611
  -11,247
  -14,389
  -18,054
  -22,293
  -27,108
  -32,507
  -38,491
  -45,058
  -52,198
  -59,901
  -68,155
  -76,946
  -86,263
  -96,094
  -106,430
  -117,265
  -128,595
  -140,420
  -152,744
  -165,573
  -178,916
  -192,788
Depreciation, amort., depletion, $m
  588
  931
  1,431
  2,133
  3,089
  4,352
  5,978
  8,019
  10,526
  13,540
  17,098
  21,215
  25,938
  31,264
  37,197
  43,738
  50,877
  58,606
  66,912
  75,782
  85,201
  95,158
  105,643
  116,647
  128,166
  140,197
  152,742
  165,807
  179,400
  193,534
  208,224
Funds from operations, $m
  320
  421
  522
  655
  824
  1,033
  1,284
  1,578
  1,915
  2,293
  2,709
  3,161
  3,645
  4,156
  4,691
  5,246
  5,820
  6,409
  7,011
  7,627
  8,255
  8,895
  9,549
  10,217
  10,901
  11,602
  12,322
  13,063
  13,827
  14,618
  15,437
Change in working capital, $m
  -171
  626
  910
  1,279
  1,740
  2,301
  2,961
  3,718
  4,564
  5,490
  6,481
  7,523
  8,600
  9,700
  10,807
  11,911
  13,003
  14,076
  15,127
  16,153
  17,155
  18,134
  19,094
  20,040
  20,977
  21,911
  22,848
  23,794
  24,756
  25,741
  26,754
Cash from operations, $m
  491
  -206
  -389
  -624
  -917
  -1,268
  -1,677
  -2,140
  -2,650
  -3,197
  -3,771
  -4,361
  -4,956
  -5,544
  -6,116
  -6,665
  -7,183
  -7,668
  -8,115
  -8,526
  -8,900
  -9,239
  -9,545
  -9,823
  -10,077
  -10,309
  -10,526
  -10,731
  -10,928
  -11,123
  -11,317
Maintenance CAPEX, $m
  0
  -573
  -917
  -1,417
  -2,119
  -3,075
  -4,338
  -5,964
  -8,006
  -10,512
  -13,526
  -17,085
  -21,215
  -25,938
  -31,264
  -37,197
  -43,738
  -50,877
  -58,606
  -66,912
  -75,782
  -85,201
  -95,158
  -105,643
  -116,647
  -128,166
  -140,197
  -152,742
  -165,807
  -179,400
  -193,534
New CAPEX, $m
  -253
  -2,648
  -3,849
  -5,407
  -7,359
  -9,728
  -12,519
  -15,719
  -19,298
  -23,210
  -27,400
  -31,806
  -36,363
  -41,010
  -45,691
  -50,359
  -54,976
  -59,514
  -63,956
  -68,294
  -72,530
  -76,671
  -80,731
  -84,731
  -88,692
  -92,639
  -96,600
  -100,600
  -104,668
  -108,831
  -113,116
Cash from investing activities, $m
  -194
  -3,221
  -4,766
  -6,824
  -9,478
  -12,803
  -16,857
  -21,683
  -27,304
  -33,722
  -40,926
  -48,891
  -57,578
  -66,948
  -76,955
  -87,556
  -98,714
  -110,391
  -122,562
  -135,206
  -148,312
  -161,872
  -175,889
  -190,374
  -205,339
  -220,805
  -236,797
  -253,342
  -270,475
  -288,231
  -306,650
Free cash flow, $m
  297
  -3,427
  -5,155
  -7,448
  -10,395
  -14,071
  -18,535
  -23,823
  -29,953
  -36,919
  -44,698
  -53,252
  -62,534
  -72,491
  -83,071
  -94,221
  -105,897
  -118,059
  -130,678
  -143,733
  -157,211
  -171,110
  -185,435
  -200,197
  -215,416
  -231,114
  -247,322
  -264,073
  -281,403
  -299,354
  -317,967
Issuance/(repayment) of debt, $m
  -2
  2,412
  3,507
  4,927
  6,705
  8,864
  11,408
  14,324
  17,585
  21,150
  24,968
  28,982
  33,134
  37,369
  41,635
  45,888
  50,095
  54,230
  58,278
  62,231
  66,090
  69,864
  73,564
  77,208
  80,818
  84,415
  88,023
  91,669
  95,375
  99,169
  103,073
Issuance/(repurchase) of shares, $m
  25
  2,487
  3,790
  5,526
  7,773
  10,601
  14,065
  18,208
  23,057
  28,622
  34,900
  41,862
  49,513
  57,806
  66,709
  76,188
  86,210
  96,748
  107,776
  119,277
  131,239
  143,656
  156,526
  169,856
  183,656
  197,941
  212,731
  228,049
  243,923
  260,383
  277,462
Cash from financing (excl. dividends), $m  
  -82
  4,899
  7,297
  10,453
  14,478
  19,465
  25,473
  32,532
  40,642
  49,772
  59,868
  70,844
  82,647
  95,175
  108,344
  122,076
  136,305
  150,978
  166,054
  181,508
  197,329
  213,520
  230,090
  247,064
  264,474
  282,356
  300,754
  319,718
  339,298
  359,552
  380,535
Total cash flow (excl. dividends), $m
  215
  1,472
  2,143
  3,004
  4,084
  5,395
  6,938
  8,709
  10,688
  12,852
  15,170
  17,593
  20,113
  22,684
  25,273
  27,855
  30,409
  32,919
  35,376
  37,776
  40,118
  42,409
  44,655
  46,867
  49,058
  51,242
  53,432
  55,645
  57,895
  60,198
  62,568
Retained Cash Flow (-), $m
  878
  -2,487
  -3,790
  -5,526
  -7,773
  -10,601
  -14,065
  -18,208
  -23,057
  -28,622
  -34,900
  -41,862
  -49,513
  -57,806
  -66,709
  -76,188
  -86,210
  -96,748
  -107,776
  -119,277
  -131,239
  -143,656
  -156,526
  -169,856
  -183,656
  -197,941
  -212,731
  -228,049
  -243,923
  -260,383
  -277,462
Prev. year cash balance distribution, $m
 
  965
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -49
  -1,648
  -2,521
  -3,689
  -5,207
  -7,127
  -9,500
  -12,368
  -15,769
  -19,730
  -24,270
  -29,399
  -35,122
  -41,436
  -48,333
  -55,802
  -63,829
  -72,400
  -81,502
  -91,121
  -101,247
  -111,871
  -122,989
  -134,598
  -146,700
  -159,299
  -172,404
  -186,028
  -200,185
  -214,894
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -47
  -1,508
  -2,194
  -3,038
  -4,036
  -5,172
  -6,418
  -7,731
  -9,059
  -10,344
  -11,525
  -12,546
  -13,354
  -13,911
  -14,190
  -14,180
  -13,888
  -13,333
  -12,549
  -11,579
  -10,472
  -9,282
  -8,061
  -6,855
  -5,707
  -4,648
  -3,700
  -2,878
  -2,185
  -1,618
Current shareholders' claim on cash, %
  100
  61.7
  38.8
  24.9
  16.3
  10.9
  7.5
  5.2
  3.7
  2.7
  1.9
  1.4
  1.1
  0.8
  0.6
  0.5
  0.4
  0.3
  0.2
  0.2
  0.1
  0.1
  0.1
  0.1
  0.1
  0.1
  0.0
  0.0
  0.0
  0.0
  0.0

Lundin Mining Corporation is a diversified base metals mining company. The Company is engaged in mining, exploration and development of mineral properties, primarily in Chile, the United States, Portugal, Sweden and the Democratic Republic of Congo (DRC). Its segments include Candeleria, Eagle, Neves-Corvo, Zinkgruvan, Tenke Fungurume and Other. Its geographical segments include Europe, Asia, South America and North America. It is engaged in producing copper, nickel and zinc. Its operating assets include the Eagle mine located in the United States, the Neves-Corvo mine located in Portugal and the Zinkgruvan mine located in Sweden. It also owns the Candelaria and Ojos del Salado mining complex (Candelaria) located in Chile. It holds an indirect equity interest in the Tenke Fungurume mine located in the DRC and the Freeport Cobalt Oy business (Freeport Cobalt), which includes a cobalt refinery located in Kokkola, Finland. It is engaged in drilling on the Elida porphyry project.

FINANCIAL RATIOS  of  Lundin Mining Corporation (LUN)

Valuation Ratios
P/E Ratio -5.8
Price to Sales 2.5
Price to Book 1.2
Price to Tangible Book
Price to Cash Flow 10.6
Price to Free Cash Flow 21.8
Growth Rates
Sales Growth Rate -9.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -32.5%
Cap. Spend. - 3 Yr. Gr. Rate -4.9%
Financial Strength
Quick Ratio 966
Current Ratio 3.3
LT Debt to Equity 31.1%
Total Debt to Equity 31.1%
Interest Coverage 3
Management Effectiveness
Return On Assets -9.1%
Ret/ On Assets - 3 Yr. Avg. -3.4%
Return On Total Capital -14.8%
Ret/ On T. Cap. - 3 Yr. Avg. -6.1%
Return On Equity -19%
Return On Equity - 3 Yr. Avg. -7.8%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 16.9%
Gross Margin - 3 Yr. Avg. 14.2%
EBITDA Margin 41.3%
EBITDA Margin - 3 Yr. Avg. 29.9%
Operating Margin 16.1%
Oper. Margin - 3 Yr. Avg. 0.2%
Pre-Tax Margin 8.3%
Pre-Tax Margin - 3 Yr. Avg. -0.8%
Net Profit Margin -42.8%
Net Profit Margin - 3 Yr. Avg. -16.1%
Effective Tax Rate 3.5%
Eff/ Tax Rate - 3 Yr. Avg. -43.8%
Payout Ratio 0%

LUN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LUN stock intrinsic value calculation we used $2088 million for the last fiscal year's total revenue generated by Lundin Mining Corporation. The default revenue input number comes from 2016 income statement of Lundin Mining Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LUN stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for LUN is calculated based on our internal credit rating of Lundin Mining Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Lundin Mining Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LUN stock the variable cost ratio is equal to 112.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LUN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.6% for Lundin Mining Corporation.

Corporate tax rate of 27% is the nominal tax rate for Lundin Mining Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LUN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LUN are equal to 211.4%.

Life of production assets of 7.7 years is the average useful life of capital assets used in Lundin Mining Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LUN is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $4275 million for Lundin Mining Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 724.103 million for Lundin Mining Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Lundin Mining Corporation at the current share price and the inputted number of shares is $5.2 billion.

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Financial statements of LUN
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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