Intrinsic value of McEwen Mining Inc. - MUX

Previous Close

$1.87

  Intrinsic Value

$0.35

stock screener

  Rating & Target

str. sell

-81%

Previous close

$1.87

 
Intrinsic value

$0.35

 
Up/down potential

-81%

 
Rating

str. sell

We calculate the intrinsic value of MUX 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 0001), $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 0.6

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  8.70
  8.33
  8.00
  7.70
  7.43
  7.18
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
  5.50
  5.45
  5.40
  5.36
  5.33
  5.30
  5.27
  5.24
  5.22
  5.19
  5.17
Revenue, $m
  140
  152
  164
  177
  190
  203
  218
  232
  248
  264
  280
  297
  315
  334
  354
  374
  395
  418
  441
  465
  490
  517
  545
  574
  604
  636
  669
  704
  740
  779
Variable operating expenses, $m
  187
  202
  219
  236
  253
  271
  290
  310
  330
  351
  373
  396
  420
  445
  471
  499
  527
  557
  588
  620
  654
  689
  726
  765
  805
  847
  892
  938
  987
  1,038
Fixed operating expenses, $m
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  5
  5
  5
  5
  6
  6
  6
  6
  6
  6
  6
  6
  7
  7
  7
  7
  7
  7
  8
  8
Total operating expenses, $m
  191
  206
  223
  240
  257
  276
  295
  315
  335
  356
  378
  401
  425
  450
  477
  505
  533
  563
  594
  626
  660
  695
  733
  772
  812
  854
  899
  945
  995
  1,046
Operating income, $m
  -51
  -55
  -59
  -63
  -68
  -72
  -77
  -82
  -87
  -93
  -98
  -104
  -110
  -117
  -123
  -130
  -137
  -145
  -153
  -161
  -170
  -179
  -188
  -198
  -208
  -219
  -230
  -242
  -254
  -267
EBITDA, $m
  -33
  -35
  -38
  -41
  -44
  -46
  -49
  -53
  -56
  -59
  -63
  -66
  -70
  -74
  -78
  -83
  -87
  -92
  -97
  -102
  -107
  -113
  -119
  -125
  -131
  -138
  -145
  -152
  -160
  -168
Interest expense (income), $m
  0
  3
  4
  5
  5
  6
  7
  8
  8
  9
  10
  11
  12
  13
  14
  15
  16
  18
  19
  20
  22
  23
  24
  26
  28
  29
  31
  33
  35
  37
  39
Earnings before tax, $m
  -54
  -59
  -63
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -123
  -131
  -139
  -147
  -155
  -164
  -173
  -183
  -193
  -203
  -214
  -225
  -237
  -250
  -263
  -277
  -291
  -306
Tax expense, $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
Net income, $m
  -54
  -59
  -63
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -123
  -131
  -139
  -147
  -155
  -164
  -173
  -183
  -193
  -203
  -214
  -225
  -237
  -250
  -263
  -277
  -291
  -306

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  671
  727
  785
  845
  908
  973
  1,041
  1,112
  1,185
  1,261
  1,341
  1,423
  1,509
  1,599
  1,692
  1,790
  1,892
  1,998
  2,109
  2,225
  2,346
  2,473
  2,605
  2,744
  2,890
  3,042
  3,201
  3,368
  3,543
  3,726
Adjusted assets (=assets-cash), $m
  671
  727
  785
  845
  908
  973
  1,041
  1,112
  1,185
  1,261
  1,341
  1,423
  1,509
  1,599
  1,692
  1,790
  1,892
  1,998
  2,109
  2,225
  2,346
  2,473
  2,605
  2,744
  2,890
  3,042
  3,201
  3,368
  3,543
  3,726
Revenue / Adjusted assets
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
  0.209
Average production assets, $m
  418
  452
  489
  526
  565
  606
  648
  692
  738
  785
  834
  886
  939
  995
  1,053
  1,114
  1,177
  1,243
  1,313
  1,385
  1,460
  1,539
  1,622
  1,708
  1,798
  1,893
  1,992
  2,096
  2,205
  2,319
Working capital, $m
  -9
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -30
  -31
  -33
  -35
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
Total debt, $m
  67
  79
  91
  104
  117
  131
  145
  160
  176
  192
  209
  226
  245
  264
  283
  304
  326
  348
  372
  396
  422
  449
  477
  506
  537
  569
  603
  639
  676
  715
Total liabilities, $m
  142
  154
  166
  179
  193
  206
  221
  236
  251
  267
  284
  302
  320
  339
  359
  379
  401
  424
  447
  472
  497
  524
  552
  582
  613
  645
  679
  714
  751
  790
Total equity, $m
  529
  573
  619
  666
  716
  767
  820
  876
  934
  994
  1,056
  1,121
  1,189
  1,260
  1,334
  1,410
  1,491
  1,574
  1,662
  1,753
  1,849
  1,949
  2,053
  2,162
  2,277
  2,397
  2,522
  2,654
  2,792
  2,936
Total liabilities and equity, $m
  671
  727
  785
  845
  909
  973
  1,041
  1,112
  1,185
  1,261
  1,340
  1,423
  1,509
  1,599
  1,693
  1,789
  1,892
  1,998
  2,109
  2,225
  2,346
  2,473
  2,605
  2,744
  2,890
  3,042
  3,201
  3,368
  3,543
  3,726
Debt-to-equity ratio
  0.130
  0.140
  0.150
  0.160
  0.160
  0.170
  0.180
  0.180
  0.190
  0.190
  0.200
  0.200
  0.210
  0.210
  0.210
  0.220
  0.220
  0.220
  0.220
  0.230
  0.230
  0.230
  0.230
  0.230
  0.240
  0.240
  0.240
  0.240
  0.240
  0.240
Adjusted equity ratio
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788
  0.788

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -54
  -59
  -63
  -68
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -116
  -123
  -131
  -139
  -147
  -155
  -164
  -173
  -183
  -193
  -203
  -214
  -225
  -237
  -250
  -263
  -277
  -291
  -306
Depreciation, amort., depletion, $m
  18
  19
  21
  22
  24
  26
  28
  30
  32
  34
  36
  38
  40
  43
  45
  48
  50
  53
  56
  59
  62
  66
  69
  73
  77
  81
  85
  90
  94
  99
Funds from operations, $m
  -36
  -39
  -43
  -46
  -50
  -53
  -57
  -61
  -65
  -69
  -74
  -78
  -83
  -88
  -94
  -99
  -105
  -111
  -117
  -123
  -130
  -137
  -145
  -152
  -161
  -169
  -178
  -187
  -197
  -207
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
Cash from operations, $m
  -35
  -39
  -42
  -45
  -49
  -52
  -56
  -60
  -64
  -68
  -73
  -77
  -82
  -87
  -92
  -98
  -103
  -109
  -115
  -122
  -128
  -135
  -143
  -150
  -158
  -167
  -176
  -185
  -194
  -205
Maintenance CAPEX, $m
  -16
  -18
  -19
  -21
  -22
  -24
  -26
  -28
  -30
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -48
  -50
  -53
  -56
  -59
  -62
  -66
  -69
  -73
  -77
  -81
  -85
  -90
  -94
New CAPEX, $m
  -33
  -35
  -36
  -38
  -39
  -41
  -42
  -44
  -46
  -47
  -49
  -51
  -54
  -56
  -58
  -61
  -63
  -66
  -69
  -72
  -75
  -79
  -83
  -86
  -90
  -95
  -99
  -104
  -109
  -114
Cash from investing activities, $m
  -49
  -53
  -55
  -59
  -61
  -65
  -68
  -72
  -76
  -79
  -83
  -87
  -92
  -96
  -101
  -106
  -111
  -116
  -122
  -128
  -134
  -141
  -149
  -155
  -163
  -172
  -180
  -189
  -199
  -208
Free cash flow, $m
  -85
  -91
  -97
  -104
  -110
  -117
  -124
  -132
  -139
  -147
  -156
  -164
  -174
  -183
  -193
  -203
  -214
  -226
  -238
  -250
  -263
  -277
  -291
  -306
  -322
  -338
  -356
  -374
  -393
  -413
Issuance/(repayment) of debt, $m
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
  18
  19
  20
  21
  22
  23
  24
  25
  26
  27
  28
  29
  31
  32
  34
  35
  37
  39
Issuance/(repurchase) of shares, $m
  97
  103
  109
  116
  123
  131
  138
  146
  154
  163
  172
  181
  191
  202
  212
  224
  235
  248
  260
  274
  288
  303
  318
  335
  352
  370
  389
  408
  429
  451
Cash from financing (excl. dividends), $m  
  108
  115
  121
  129
  136
  145
  152
  161
  170
  179
  189
  199
  209
  221
  232
  245
  257
  271
  284
  299
  314
  330
  346
  364
  383
  402
  423
  443
  466
  490
Total cash flow (excl. dividends), $m
  23
  23
  24
  25
  26
  27
  28
  29
  31
  32
  33
  35
  36
  37
  39
  41
  43
  44
  46
  49
  51
  53
  55
  58
  61
  64
  67
  70
  73
  77
Retained Cash Flow (-), $m
  -97
  -103
  -109
  -116
  -123
  -131
  -138
  -146
  -154
  -163
  -172
  -181
  -191
  -202
  -212
  -224
  -235
  -248
  -260
  -274
  -288
  -303
  -318
  -335
  -352
  -370
  -389
  -408
  -429
  -451
Prev. year cash balance distribution, $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 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
  -74
  -79
  -85
  -91
  -97
  -103
  -110
  -117
  -124
  -131
  -139
  -147
  -155
  -164
  -173
  -183
  -193
  -203
  -214
  -225
  -237
  -250
  -263
  -277
  -291
  -306
  -322
  -338
  -356
  -374
Discount rate, %
  5.70
  5.99
  6.28
  6.60
  6.93
  7.27
  7.64
  8.02
  8.42
  8.84
  9.28
  9.75
  10.24
  10.75
  11.29
  11.85
  12.44
  13.06
  13.72
  14.40
  15.12
  15.88
  16.67
  17.51
  18.38
  19.30
  20.27
  21.28
  22.34
  23.46
PV of cash for distribution, $m
  -70
  -71
  -71
  -70
  -69
  -68
  -66
  -63
  -60
  -56
  -52
  -48
  -44
  -39
  -35
  -30
  -26
  -22
  -19
  -15
  -12
  -10
  -8
  -6
  -4
  -3
  -2
  -2
  -1
  -1
Current shareholders' claim on cash, %
  87.0
  75.9
  66.3
  58.1
  51.0
  44.8
  39.5
  34.8
  30.7
  27.2
  24.0
  21.3
  18.9
  16.7
  14.8
  13.2
  11.7
  10.4
  9.2
  8.2
  7.3
  6.5
  5.8
  5.2
  4.6
  4.1
  3.7
  3.3
  2.9
  2.6

McEwen Mining Inc. is a mining and minerals production and exploration company. The Company is focused on precious and base metals in Argentina, Mexico and the United States. The Company's segments include Mexico, Minera Santa Cruz S.A. (MSC), Nevada and Los Azules. The Mexico Operations segment includes properties, such as El Gallo 1 mine and the El Gallo 2 project. The MSC segment includes properties, such as the San Jose mine and other concessions located around the mine. The Company's properties in Nevada segment include Gold Bar project and exploration properties. The Gold Bar project is a proposed mine project. The Los Azules segment includes various properties, such as Los Azules project, Chonchones project, Laganoso project, La Cerrada project and Other Argentina properties. The Los Azules copper project is an advanced-stage porphyry copper exploration project located in the cordilleran region of San Juan Province, Argentina near the border with Chile.

FINANCIAL RATIOS  of  McEwen Mining Inc. (MUX)

Valuation Ratios
P/E Ratio 26.7
Price to Sales 9.3
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 22.4
Price to Free Cash Flow 31.1
Growth Rates
Sales Growth Rate -17.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 600%
Cap. Spend. - 3 Yr. Gr. Rate 11.8%
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 4.3%
Ret/ On Assets - 3 Yr. Avg. -14.3%
Return On Total Capital 4.9%
Ret/ On T. Cap. - 3 Yr. Avg. -17.4%
Return On Equity 4.9%
Return On Equity - 3 Yr. Avg. -17.4%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 53.3%
Gross Margin - 3 Yr. Avg. 38.8%
EBITDA Margin 28.3%
EBITDA Margin - 3 Yr. Avg. -321.5%
Operating Margin 23.3%
Oper. Margin - 3 Yr. Avg. -318.3%
Pre-Tax Margin 28.3%
Pre-Tax Margin - 3 Yr. Avg. -321.5%
Net Profit Margin 35%
Net Profit Margin - 3 Yr. Avg. -228.6%
Effective Tax Rate -23.5%
Eff/ Tax Rate - 3 Yr. Avg. 19.2%
Payout Ratio 14.3%

MUX stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MUX stock intrinsic value calculation we used $129 million for the last fiscal year's total revenue generated by McEwen Mining Inc.. The default revenue input number comes from 0001 income statement of McEwen Mining Inc.. 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 MUX stock valuation model: a) initial revenue growth rate of 8.7% 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 5.7%, whose default value for MUX is calculated based on our internal credit rating of McEwen Mining Inc., 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 McEwen Mining Inc..
    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 MUX stock the variable cost ratio is equal to 133.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $4 million in the base year in the intrinsic value calculation for MUX 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 5.8% for McEwen Mining Inc..

Corporate tax rate of 27% is the nominal tax rate for McEwen Mining Inc.. 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 MUX 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 MUX are equal to 297.8%.

Life of production assets of 23.4 years is the average useful life of capital assets used in McEwen Mining Inc. 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 MUX is equal to -6.7%. 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 - $485.946 million for McEwen Mining Inc. - 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 344.929 million for McEwen Mining Inc. 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 McEwen Mining Inc. at the current share price and the inputted number of shares is $0.6 billion.

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