Intrinsic value of Lundin Mining Corporation - LUN

Previous Close

$9.97

  Intrinsic Value

$1.42

stock screener

  Rating & Target

str. sell

-86%

Previous close

$9.97

 
Intrinsic value

$1.42

 
Up/down potential

-86%

 
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 7.2

 

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
  32.60
  29.84
  27.36
  25.12
  23.11
  21.30
  19.67
  18.20
  16.88
  15.69
  14.62
  13.66
  12.80
  12.02
  11.31
  10.68
  10.11
  9.60
  9.14
  8.73
  8.36
  8.02
  7.72
  7.45
  7.20
  6.98
  6.78
  6.60
  6.44
  6.30
Revenue, $m
  2,088
  2,769
  3,595
  4,578
  5,728
  7,052
  8,554
  10,236
  12,100
  14,142
  16,361
  18,754
  21,316
  24,043
  26,932
  29,979
  33,182
  36,538
  40,047
  43,708
  47,523
  51,494
  55,624
  59,917
  64,378
  69,014
  73,833
  78,841
  84,048
  89,465
  95,101
Variable operating expenses, $m
 
  3,110
  4,034
  5,134
  6,420
  7,901
  9,581
  11,462
  13,546
  15,830
  18,312
  20,974
  23,840
  26,890
  30,121
  33,529
  37,110
  40,864
  44,788
  48,883
  53,149
  57,590
  62,209
  67,010
  72,000
  77,185
  82,574
  88,175
  93,999
  100,056
  106,360
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
  3,110
  4,034
  5,134
  6,420
  7,901
  9,581
  11,462
  13,546
  15,830
  18,312
  20,974
  23,840
  26,890
  30,121
  33,529
  37,110
  40,864
  44,788
  48,883
  53,149
  57,590
  62,209
  67,010
  72,000
  77,185
  82,574
  88,175
  93,999
  100,056
  106,360
Operating income, $m
  337
  -342
  -439
  -556
  -692
  -849
  -1,027
  -1,226
  -1,446
  -1,688
  -1,951
  -2,220
  -2,524
  -2,847
  -3,189
  -3,549
  -3,928
  -4,326
  -4,741
  -5,175
  -5,626
  -6,096
  -6,585
  -7,094
  -7,622
  -8,171
  -8,741
  -9,334
  -9,951
  -10,592
  -11,259
EBITDA, $m
  925
  432
  561
  715
  895
  1,101
  1,336
  1,598
  1,889
  2,208
  2,555
  2,929
  3,329
  3,754
  4,206
  4,681
  5,182
  5,706
  6,253
  6,825
  7,421
  8,041
  8,686
  9,356
  10,053
  10,777
  11,529
  12,311
  13,125
  13,970
  14,850
Interest expense (income), $m
  101
  101
  201
  321
  465
  634
  828
  1,047
  1,294
  1,567
  1,866
  2,190
  2,541
  2,916
  3,315
  3,738
  4,184
  4,653
  5,144
  5,658
  6,194
  6,753
  7,334
  7,938
  8,567
  9,220
  9,899
  10,604
  11,337
  12,100
  12,893
Earnings before tax, $m
  173
  -443
  -640
  -877
  -1,157
  -1,483
  -1,854
  -2,273
  -2,740
  -3,255
  -3,816
  -4,411
  -5,064
  -5,762
  -6,504
  -7,287
  -8,113
  -8,979
  -9,886
  -10,833
  -11,820
  -12,849
  -13,919
  -15,032
  -16,189
  -17,391
  -18,640
  -19,938
  -21,288
  -22,692
  -24,152
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
  -443
  -640
  -877
  -1,157
  -1,483
  -1,854
  -2,273
  -2,740
  -3,255
  -3,816
  -4,411
  -5,064
  -5,762
  -6,504
  -7,287
  -8,113
  -8,979
  -9,886
  -10,833
  -11,820
  -12,849
  -13,919
  -15,032
  -16,189
  -17,391
  -18,640
  -19,938
  -21,288
  -22,692
  -24,152

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
  9,715
  12,614
  16,064
  20,099
  24,744
  30,014
  35,917
  42,454
  49,621
  57,408
  65,803
  74,793
  84,362
  94,499
  105,191
  116,428
  128,204
  140,515
  153,362
  166,747
  180,680
  195,171
  210,234
  225,888
  242,156
  259,061
  276,634
  294,906
  313,911
  333,687
Adjusted assets (=assets-cash), $m
  7,333
  9,715
  12,614
  16,064
  20,099
  24,744
  30,014
  35,917
  42,454
  49,621
  57,408
  65,803
  74,793
  84,362
  94,499
  105,191
  116,428
  128,204
  140,515
  153,362
  166,747
  180,680
  195,171
  210,234
  225,888
  242,156
  259,061
  276,634
  294,906
  313,911
  333,687
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
  5,853
  7,600
  9,678
  12,110
  14,908
  18,083
  21,640
  25,578
  29,896
  34,588
  39,646
  45,062
  50,827
  56,935
  63,376
  70,147
  77,241
  84,659
  92,399
  100,464
  108,858
  117,588
  126,664
  136,095
  145,896
  156,082
  166,669
  177,678
  189,128
  201,043
Working capital, $m
  2,773
  1,384
  1,797
  2,289
  2,864
  3,526
  4,277
  5,118
  6,050
  7,071
  8,181
  9,377
  10,658
  12,022
  13,466
  14,990
  16,591
  18,269
  20,023
  21,854
  23,762
  25,747
  27,812
  29,958
  32,189
  34,507
  36,916
  39,420
  42,024
  44,732
  47,550
Total debt, $m
  1,329
  2,638
  4,230
  6,124
  8,340
  10,890
  13,783
  17,024
  20,612
  24,547
  28,822
  33,431
  38,366
  43,620
  49,185
  55,055
  61,224
  67,689
  74,448
  81,500
  88,849
  96,498
  104,454
  112,723
  121,318
  130,248
  139,530
  149,177
  159,208
  169,642
  180,499
Total liabilities, $m
  4,024
  5,333
  6,925
  8,819
  11,035
  13,585
  16,478
  19,719
  23,307
  27,242
  31,517
  36,126
  41,061
  46,315
  51,880
  57,750
  63,919
  70,384
  77,143
  84,195
  91,544
  99,193
  107,149
  115,418
  124,013
  132,943
  142,225
  151,872
  161,903
  172,337
  183,194
Total equity, $m
  4,275
  4,381
  5,689
  7,245
  9,065
  11,160
  13,536
  16,199
  19,147
  22,379
  25,891
  29,677
  33,731
  38,047
  42,619
  47,441
  52,509
  57,820
  63,372
  69,166
  75,203
  81,487
  88,022
  94,815
  101,876
  109,212
  116,837
  124,762
  133,003
  141,574
  150,493
Total liabilities and equity, $m
  8,299
  9,714
  12,614
  16,064
  20,100
  24,745
  30,014
  35,918
  42,454
  49,621
  57,408
  65,803
  74,792
  84,362
  94,499
  105,191
  116,428
  128,204
  140,515
  153,361
  166,747
  180,680
  195,171
  210,233
  225,889
  242,155
  259,062
  276,634
  294,906
  313,911
  333,687
Debt-to-equity ratio
  0.311
  0.600
  0.740
  0.850
  0.920
  0.980
  1.020
  1.050
  1.080
  1.100
  1.110
  1.130
  1.140
  1.150
  1.150
  1.160
  1.170
  1.170
  1.170
  1.180
  1.180
  1.180
  1.190
  1.190
  1.190
  1.190
  1.190
  1.200
  1.200
  1.200
  1.200
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
  -443
  -640
  -877
  -1,157
  -1,483
  -1,854
  -2,273
  -2,740
  -3,255
  -3,816
  -4,411
  -5,064
  -5,762
  -6,504
  -7,287
  -8,113
  -8,979
  -9,886
  -10,833
  -11,820
  -12,849
  -13,919
  -15,032
  -16,189
  -17,391
  -18,640
  -19,938
  -21,288
  -22,692
  -24,152
Depreciation, amort., depletion, $m
  588
  774
  1,001
  1,271
  1,586
  1,950
  2,362
  2,824
  3,336
  3,896
  4,506
  5,149
  5,852
  6,601
  7,394
  8,231
  9,110
  10,031
  10,995
  12,000
  13,047
  14,137
  15,271
  16,450
  17,675
  18,948
  20,270
  21,645
  23,075
  24,562
  26,110
Funds from operations, $m
  320
  331
  361
  393
  429
  467
  508
  551
  596
  642
  689
  738
  788
  839
  890
  943
  997
  1,053
  1,109
  1,167
  1,227
  1,288
  1,352
  1,418
  1,486
  1,557
  1,630
  1,707
  1,787
  1,870
  1,958
Change in working capital, $m
  -171
  340
  413
  492
  575
  662
  751
  841
  932
  1,021
  1,110
  1,196
  1,281
  1,364
  1,444
  1,524
  1,601
  1,678
  1,754
  1,831
  1,907
  1,985
  2,065
  2,147
  2,231
  2,318
  2,409
  2,504
  2,604
  2,708
  2,818
Cash from operations, $m
  491
  -9
  -52
  -98
  -146
  -194
  -243
  -290
  -336
  -379
  -420
  -458
  -493
  -525
  -554
  -580
  -604
  -625
  -645
  -663
  -681
  -697
  -713
  -729
  -745
  -761
  -779
  -797
  -817
  -838
  -860
Maintenance CAPEX, $m
  0
  -573
  -760
  -987
  -1,257
  -1,573
  -1,936
  -2,348
  -2,810
  -3,322
  -3,883
  -4,492
  -5,149
  -5,852
  -6,601
  -7,394
  -8,231
  -9,110
  -10,031
  -10,995
  -12,000
  -13,047
  -14,137
  -15,271
  -16,450
  -17,675
  -18,948
  -20,270
  -21,645
  -23,075
  -24,562
New CAPEX, $m
  -253
  -1,439
  -1,747
  -2,079
  -2,431
  -2,798
  -3,175
  -3,557
  -3,939
  -4,318
  -4,692
  -5,058
  -5,416
  -5,766
  -6,107
  -6,442
  -6,770
  -7,095
  -7,417
  -7,740
  -8,065
  -8,394
  -8,730
  -9,075
  -9,432
  -9,801
  -10,186
  -10,587
  -11,008
  -11,450
  -11,915
Cash from investing activities, $m
  -194
  -2,012
  -2,507
  -3,066
  -3,688
  -4,371
  -5,111
  -5,905
  -6,749
  -7,640
  -8,575
  -9,550
  -10,565
  -11,618
  -12,708
  -13,836
  -15,001
  -16,205
  -17,448
  -18,735
  -20,065
  -21,441
  -22,867
  -24,346
  -25,882
  -27,476
  -29,134
  -30,857
  -32,653
  -34,525
  -36,477
Free cash flow, $m
  297
  -2,021
  -2,559
  -3,164
  -3,834
  -4,566
  -5,354
  -6,195
  -7,085
  -8,019
  -8,995
  -10,008
  -11,058
  -12,143
  -13,262
  -14,416
  -15,605
  -16,830
  -18,094
  -19,398
  -20,745
  -22,138
  -23,581
  -25,075
  -26,626
  -28,237
  -29,912
  -31,655
  -33,470
  -35,363
  -37,338
Issuance/(repayment) of debt, $m
  -2
  1,310
  1,591
  1,894
  2,215
  2,550
  2,893
  3,241
  3,589
  3,935
  4,275
  4,609
  4,935
  5,254
  5,565
  5,870
  6,169
  6,465
  6,759
  7,053
  7,349
  7,649
  7,955
  8,270
  8,594
  8,931
  9,281
  9,647
  10,031
  10,434
  10,857
Issuance/(repurchase) of shares, $m
  25
  1,514
  1,947
  2,433
  2,977
  3,577
  4,231
  4,935
  5,688
  6,487
  7,328
  8,197
  9,119
  10,078
  11,075
  12,109
  13,181
  14,290
  15,438
  16,627
  17,857
  19,133
  20,454
  21,826
  23,249
  24,727
  26,265
  27,864
  29,528
  31,263
  33,071
Cash from financing (excl. dividends), $m  
  -82
  2,824
  3,538
  4,327
  5,192
  6,127
  7,124
  8,176
  9,277
  10,422
  11,603
  12,806
  14,054
  15,332
  16,640
  17,979
  19,350
  20,755
  22,197
  23,680
  25,206
  26,782
  28,409
  30,096
  31,843
  33,658
  35,546
  37,511
  39,559
  41,697
  43,928
Total cash flow (excl. dividends), $m
  215
  803
  980
  1,164
  1,359
  1,562
  1,770
  1,981
  2,192
  2,402
  2,609
  2,798
  2,996
  3,189
  3,378
  3,563
  3,745
  3,924
  4,103
  4,281
  4,461
  4,643
  4,829
  5,020
  5,217
  5,421
  5,634
  5,856
  6,089
  6,334
  6,591
Retained Cash Flow (-), $m
  878
  -1,514
  -1,947
  -2,433
  -2,977
  -3,577
  -4,231
  -4,935
  -5,688
  -6,487
  -7,328
  -8,197
  -9,119
  -10,078
  -11,075
  -12,109
  -13,181
  -14,290
  -15,438
  -16,627
  -17,857
  -19,133
  -20,454
  -21,826
  -23,249
  -24,727
  -26,265
  -27,864
  -29,528
  -31,263
  -33,071
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
 
  255
  -967
  -1,270
  -1,619
  -2,016
  -2,461
  -2,954
  -3,496
  -4,085
  -4,719
  -5,399
  -6,123
  -6,889
  -7,697
  -8,546
  -9,436
  -10,365
  -11,335
  -12,345
  -13,396
  -14,489
  -15,625
  -16,806
  -18,032
  -19,306
  -20,631
  -22,007
  -23,439
  -24,929
  -26,480
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
 
  244
  -886
  -1,105
  -1,333
  -1,562
  -1,786
  -1,996
  -2,185
  -2,346
  -2,474
  -2,564
  -2,613
  -2,619
  -2,584
  -2,509
  -2,398
  -2,255
  -2,087
  -1,901
  -1,702
  -1,499
  -1,296
  -1,101
  -918
  -751
  -602
  -472
  -363
  -272
  -199
Current shareholders' claim on cash, %
  100
  78.7
  62.4
  49.8
  40.1
  32.5
  26.6
  21.9
  18.1
  15.1
  12.6
  10.7
  9.0
  7.7
  6.5
  5.6
  4.8
  4.1
  3.6
  3.1
  2.7
  2.3
  2.0
  1.8
  1.6
  1.4
  1.2
  1.0
  0.9
  0.8
  0.7

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 -8.1
Price to Sales 3.5
Price to Book 1.7
Price to Tangible Book
Price to Cash Flow 14.7
Price to Free Cash Flow 30.4
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 32.6% 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 726.588 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 $7.2 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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