Intrinsic value of Nevsun Resources Ltd. - NSU

Previous Close

$2.99

  Intrinsic Value

$1.04

stock screener

  Rating & Target

str. sell

-65%

Previous close

$2.99

 
Intrinsic value

$1.04

 
Up/down potential

-65%

 
Rating

str. sell

We calculate the intrinsic value of NSU 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 0.9

 

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, %
  -35.27
  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
  312
  499
  771
  1,153
  1,674
  2,361
  3,246
  4,357
  5,721
  7,362
  9,299
  11,547
  14,117
  17,016
  20,245
  23,805
  27,691
  31,897
  36,418
  41,245
  46,372
  51,791
  57,498
  63,487
  69,756
  76,304
  83,132
  90,243
  97,641
  105,334
  113,329
Variable operating expenses, $m
 
  389
  601
  899
  1,304
  1,839
  2,529
  3,394
  4,457
  5,735
  7,244
  8,995
  10,997
  13,255
  15,771
  18,544
  21,571
  24,848
  28,370
  32,130
  36,124
  40,345
  44,791
  49,456
  54,340
  59,441
  64,760
  70,299
  76,062
  82,055
  88,283
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
  229
  389
  601
  899
  1,304
  1,839
  2,529
  3,394
  4,457
  5,735
  7,244
  8,995
  10,997
  13,255
  15,771
  18,544
  21,571
  24,848
  28,370
  32,130
  36,124
  40,345
  44,791
  49,456
  54,340
  59,441
  64,760
  70,299
  76,062
  82,055
  88,283
Operating income, $m
  83
  110
  170
  255
  370
  522
  717
  963
  1,264
  1,627
  2,055
  2,552
  3,120
  3,760
  4,474
  5,261
  6,120
  7,049
  8,048
  9,115
  10,248
  11,446
  12,707
  14,031
  15,416
  16,863
  18,372
  19,944
  21,579
  23,279
  25,046
EBITDA, $m
  131
  187
  289
  432
  627
  885
  1,216
  1,633
  2,144
  2,759
  3,484
  4,327
  5,290
  6,376
  7,586
  8,920
  10,376
  11,952
  13,646
  15,455
  17,376
  19,407
  21,545
  23,789
  26,138
  28,592
  31,151
  33,815
  36,587
  39,470
  42,466
Interest expense (income), $m
  0
  0
  11
  26
  48
  78
  118
  168
  232
  310
  404
  516
  645
  792
  958
  1,144
  1,348
  1,571
  1,812
  2,072
  2,349
  2,643
  2,954
  3,281
  3,625
  3,985
  4,360
  4,752
  5,160
  5,585
  6,026
Earnings before tax, $m
  82
  110
  160
  229
  322
  444
  600
  795
  1,032
  1,317
  1,650
  2,036
  2,475
  2,968
  3,516
  4,117
  4,772
  5,478
  6,236
  7,043
  7,899
  8,803
  9,753
  10,749
  11,791
  12,879
  14,012
  15,191
  16,418
  17,694
  19,020
Tax expense, $m
  40
  30
  43
  62
  87
  120
  162
  215
  279
  355
  446
  550
  668
  801
  949
  1,112
  1,288
  1,479
  1,684
  1,902
  2,133
  2,377
  2,633
  2,902
  3,184
  3,477
  3,783
  4,102
  4,433
  4,777
  5,135
Net income, $m
  15
  81
  117
  167
  235
  324
  438
  580
  754
  961
  1,205
  1,486
  1,807
  2,167
  2,567
  3,005
  3,483
  3,999
  4,552
  5,142
  5,767
  6,426
  7,120
  7,847
  8,608
  9,401
  10,229
  11,090
  11,985
  12,917
  13,884

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  269
  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
  1,769
  2,400
  3,708
  5,545
  8,046
  11,352
  15,606
  20,948
  27,506
  35,393
  44,705
  55,513
  67,870
  81,806
  97,333
  114,446
  133,128
  153,353
  175,087
  198,295
  222,942
  248,997
  276,431
  305,225
  335,365
  366,846
  399,673
  433,860
  469,428
  506,412
  544,852
Adjusted assets (=assets-cash), $m
  1,500
  2,400
  3,708
  5,545
  8,046
  11,352
  15,606
  20,948
  27,506
  35,393
  44,705
  55,513
  67,870
  81,806
  97,333
  114,446
  133,128
  153,353
  175,087
  198,295
  222,942
  248,997
  276,431
  305,225
  335,365
  366,846
  399,673
  433,860
  469,428
  506,412
  544,852
Revenue / Adjusted assets
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
  0.208
Average production assets, $m
  931
  1,489
  2,300
  3,440
  4,991
  7,041
  9,680
  12,993
  17,061
  21,953
  27,728
  34,432
  42,097
  50,741
  60,371
  70,986
  82,574
  95,118
  108,599
  122,994
  138,281
  154,442
  171,458
  189,318
  208,012
  227,539
  247,900
  269,104
  291,166
  314,105
  337,947
Working capital, $m
  272
  5
  8
  12
  17
  24
  32
  44
  57
  74
  93
  115
  141
  170
  202
  238
  277
  319
  364
  412
  464
  518
  575
  635
  698
  763
  831
  902
  976
  1,053
  1,133
Total debt, $m
  0
  306
  752
  1,379
  2,232
  3,359
  4,810
  6,631
  8,867
  11,557
  14,732
  18,418
  22,632
  27,384
  32,679
  38,514
  44,885
  51,781
  59,193
  67,107
  75,511
  84,396
  93,751
  103,570
  113,847
  124,583
  135,777
  147,434
  159,563
  172,174
  185,282
Total liabilities, $m
  512
  818
  1,264
  1,891
  2,744
  3,871
  5,322
  7,143
  9,379
  12,069
  15,244
  18,930
  23,144
  27,896
  33,191
  39,026
  45,397
  52,293
  59,705
  67,619
  76,023
  84,908
  94,263
  104,082
  114,359
  125,095
  136,289
  147,946
  160,075
  172,686
  185,794
Total equity, $m
  1,257
  1,582
  2,444
  3,654
  5,302
  7,481
  10,284
  13,805
  18,126
  23,324
  29,460
  36,583
  44,726
  53,910
  64,142
  75,420
  87,732
  101,060
  115,382
  130,676
  146,919
  164,089
  182,168
  201,143
  221,006
  241,752
  263,385
  285,913
  309,353
  333,725
  359,057
Total liabilities and equity, $m
  1,769
  2,400
  3,708
  5,545
  8,046
  11,352
  15,606
  20,948
  27,505
  35,393
  44,704
  55,513
  67,870
  81,806
  97,333
  114,446
  133,129
  153,353
  175,087
  198,295
  222,942
  248,997
  276,431
  305,225
  335,365
  366,847
  399,674
  433,859
  469,428
  506,411
  544,851
Debt-to-equity ratio
  0.000
  0.190
  0.310
  0.380
  0.420
  0.450
  0.470
  0.480
  0.490
  0.500
  0.500
  0.500
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.510
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
  0.520
Adjusted equity ratio
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659
  0.659

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  15
  81
  117
  167
  235
  324
  438
  580
  754
  961
  1,205
  1,486
  1,807
  2,167
  2,567
  3,005
  3,483
  3,999
  4,552
  5,142
  5,767
  6,426
  7,120
  7,847
  8,608
  9,401
  10,229
  11,090
  11,985
  12,917
  13,884
Depreciation, amort., depletion, $m
  48
  77
  119
  177
  257
  363
  499
  670
  879
  1,132
  1,429
  1,775
  2,170
  2,615
  3,112
  3,659
  4,256
  4,903
  5,598
  6,340
  7,128
  7,961
  8,838
  9,759
  10,722
  11,729
  12,778
  13,871
  15,009
  16,191
  17,420
Funds from operations, $m
  -20
  157
  235
  344
  492
  687
  937
  1,250
  1,633
  2,093
  2,634
  3,261
  3,977
  4,782
  5,678
  6,665
  7,740
  8,902
  10,150
  11,482
  12,895
  14,387
  15,958
  17,606
  19,330
  21,130
  23,007
  24,961
  26,994
  29,108
  31,304
Change in working capital, $m
  -80
  2
  3
  4
  5
  7
  9
  11
  14
  16
  19
  22
  26
  29
  32
  36
  39
  42
  45
  48
  51
  54
  57
  60
  63
  65
  68
  71
  74
  77
  80
Cash from operations, $m
  60
  155
  232
  340
  487
  680
  928
  1,239
  1,619
  2,076
  2,615
  3,239
  3,951
  4,753
  5,646
  6,629
  7,701
  8,860
  10,105
  11,433
  12,843
  14,333
  15,901
  17,546
  19,267
  21,065
  22,939
  24,890
  26,920
  29,031
  31,224
Maintenance CAPEX, $m
  0
  -48
  -77
  -119
  -177
  -257
  -363
  -499
  -670
  -879
  -1,132
  -1,429
  -1,775
  -2,170
  -2,615
  -3,112
  -3,659
  -4,256
  -4,903
  -5,598
  -6,340
  -7,128
  -7,961
  -8,838
  -9,759
  -10,722
  -11,729
  -12,778
  -13,871
  -15,009
  -16,191
New CAPEX, $m
  -335
  -558
  -811
  -1,140
  -1,551
  -2,050
  -2,639
  -3,313
  -4,068
  -4,892
  -5,775
  -6,704
  -7,664
  -8,644
  -9,631
  -10,615
  -11,588
  -12,544
  -13,481
  -14,395
  -15,288
  -16,161
  -17,016
  -17,860
  -18,694
  -19,526
  -20,361
  -21,204
  -22,062
  -22,939
  -23,842
Cash from investing activities, $m
  -334
  -606
  -888
  -1,259
  -1,728
  -2,307
  -3,002
  -3,812
  -4,738
  -5,771
  -6,907
  -8,133
  -9,439
  -10,814
  -12,246
  -13,727
  -15,247
  -16,800
  -18,384
  -19,993
  -21,628
  -23,289
  -24,977
  -26,698
  -28,453
  -30,248
  -32,090
  -33,982
  -35,933
  -37,948
  -40,033
Free cash flow, $m
  -274
  -451
  -656
  -918
  -1,242
  -1,628
  -2,074
  -2,574
  -3,118
  -3,695
  -4,292
  -4,894
  -5,488
  -6,060
  -6,600
  -7,098
  -7,546
  -7,941
  -8,279
  -8,559
  -8,784
  -8,956
  -9,077
  -9,152
  -9,186
  -9,184
  -9,151
  -9,093
  -9,013
  -8,917
  -8,809
Issuance/(repayment) of debt, $m
  0
  306
  446
  627
  853
  1,127
  1,451
  1,822
  2,236
  2,690
  3,175
  3,686
  4,214
  4,752
  5,295
  5,836
  6,371
  6,897
  7,411
  7,914
  8,405
  8,885
  9,355
  9,819
  10,278
  10,735
  11,194
  11,658
  12,129
  12,611
  13,108
Issuance/(repurchase) of shares, $m
  1
  513
  745
  1,044
  1,413
  1,855
  2,366
  2,940
  3,568
  4,237
  4,931
  5,636
  6,336
  7,017
  7,666
  8,272
  8,828
  9,329
  9,770
  10,152
  10,476
  10,744
  10,960
  11,128
  11,255
  11,345
  11,404
  11,439
  11,454
  11,455
  11,447
Cash from financing (excl. dividends), $m  
  2
  819
  1,191
  1,671
  2,266
  2,982
  3,817
  4,762
  5,804
  6,927
  8,106
  9,322
  10,550
  11,769
  12,961
  14,108
  15,199
  16,226
  17,181
  18,066
  18,881
  19,629
  20,315
  20,947
  21,533
  22,080
  22,598
  23,097
  23,583
  24,066
  24,555
Total cash flow (excl. dividends), $m
  -272
  369
  536
  753
  1,024
  1,354
  1,743
  2,188
  2,686
  3,231
  3,814
  4,427
  5,062
  5,709
  6,360
  7,010
  7,653
  8,285
  8,903
  9,507
  10,096
  10,673
  11,238
  11,795
  12,346
  12,896
  13,447
  14,004
  14,570
  15,150
  15,746
Retained Cash Flow (-), $m
  -353
  -594
  -862
  -1,211
  -1,648
  -2,178
  -2,804
  -3,520
  -4,322
  -5,198
  -6,136
  -7,123
  -8,143
  -9,184
  -10,232
  -11,278
  -12,312
  -13,328
  -14,323
  -15,294
  -16,243
  -17,170
  -18,079
  -18,975
  -19,862
  -20,746
  -21,633
  -22,529
  -23,440
  -24,372
  -25,332
Prev. year cash balance distribution, $m
 
  269
  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
 
  44
  -326
  -458
  -624
  -824
  -1,061
  -1,332
  -1,635
  -1,967
  -2,322
  -2,695
  -3,081
  -3,475
  -3,872
  -4,267
  -4,659
  -5,043
  -5,420
  -5,787
  -6,146
  -6,497
  -6,841
  -7,180
  -7,516
  -7,850
  -8,186
  -8,525
  -8,870
  -9,222
  -9,585
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
 
  42
  -299
  -399
  -513
  -639
  -770
  -900
  -1,022
  -1,130
  -1,217
  -1,280
  -1,315
  -1,321
  -1,300
  -1,253
  -1,184
  -1,097
  -998
  -891
  -781
  -672
  -568
  -471
  -383
  -305
  -239
  -183
  -137
  -101
  -72
Current shareholders' claim on cash, %
  100
  58.0
  35.1
  22.0
  14.3
  9.6
  6.7
  4.8
  3.5
  2.7
  2.0
  1.6
  1.3
  1.1
  0.9
  0.8
  0.7
  0.6
  0.5
  0.4
  0.4
  0.4
  0.3
  0.3
  0.3
  0.3
  0.2
  0.2
  0.2
  0.2
  0.2

Nevsun Resources Ltd. is a base metals company. The Company's two principal properties are the Timok Project in Serbia, which hosts the copper-gold Cukaru Peki deposit on the Brestovac-Metovnica Exploration Permit (the B-M Permit) and the Bisha Property in Eritrea, which hosts the copper-zinc-gold Bisha deposit and includes satellite volcanogenic massive sulphides (VMS) deposits at Harena, Northwest, Hambok and Asheli. The Company's principal mining operation is the Bisha Mine, which is located on the Bisha Property. The Timok Project is located in eastern Serbia near the Bor Mining and Smelting complex. The Timok project is located within the central zone of the Timok Magmatic Complex (TMC), in the Serbian section of the East European Carpathian-Balkan Arc. In addition, the Company owns the New Mogoraib River Exploration License, which covers an area of 630 square kilometers and the Tabakin Exploration License covering 184 square kilometers both adjacent to the Bisha Mining License.

FINANCIAL RATIOS  of  Nevsun Resources Ltd. (NSU)

Valuation Ratios
P/E Ratio 60.1
Price to Sales 2.9
Price to Book 0.7
Price to Tangible Book
Price to Cash Flow 15
Price to Free Cash Flow -3.3
Growth Rates
Sales Growth Rate -35.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 191.3%
Cap. Spend. - 3 Yr. Gr. Rate 13.2%
Financial Strength
Quick Ratio NaN
Current Ratio 0.1
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 1%
Ret/ On Assets - 3 Yr. Avg. 4.4%
Return On Total Capital 1.4%
Ret/ On T. Cap. - 3 Yr. Avg. 6.4%
Return On Equity 1.4%
Return On Equity - 3 Yr. Avg. 6.4%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 39.7%
Gross Margin - 3 Yr. Avg. 42.9%
EBITDA Margin 41.7%
EBITDA Margin - 3 Yr. Avg. 44.8%
Operating Margin 26.6%
Oper. Margin - 3 Yr. Avg. 33%
Pre-Tax Margin 26.3%
Pre-Tax Margin - 3 Yr. Avg. 33.1%
Net Profit Margin 4.8%
Net Profit Margin - 3 Yr. Avg. 9.3%
Effective Tax Rate 48.8%
Eff/ Tax Rate - 3 Yr. Avg. 44.1%
Payout Ratio 306.7%

NSU stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NSU stock intrinsic value calculation we used $312 million for the last fiscal year's total revenue generated by Nevsun Resources Ltd.. The default revenue input number comes from 2016 income statement of Nevsun Resources Ltd.. 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 NSU 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 NSU is calculated based on our internal credit rating of Nevsun Resources Ltd., 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 Nevsun Resources Ltd..
    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 NSU stock the variable cost ratio is equal to 77.9%.

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 NSU 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 3.5% for Nevsun Resources Ltd..

Corporate tax rate of 27% is the nominal tax rate for Nevsun Resources Ltd.. 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 NSU 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 NSU are equal to 298.2%.

Life of production assets of 19.4 years is the average useful life of capital assets used in Nevsun Resources Ltd. 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 NSU is equal to 1%. 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 - $1257 million for Nevsun Resources Ltd. - 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 302.086 million for Nevsun Resources Ltd. 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 Nevsun Resources Ltd. at the current share price and the inputted number of shares is $0.9 billion.

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Financial statements of NSU
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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