P/NAV

Share price divided by net asset value per share. The metric answers one question and one only: what is the market paying today for a euro of value that will not come out of the ground for years?

Why the metric exists at all

An exploration company has no revenue and no profit. There is no earnings multiple to be had. What it does have is a documented asset in the ground — and a long, expensive road to reaching it.

The NAV puts a figure on that asset: the discounted cash flows of the project as set out in the technical report, plus cash, less debt. P/NAV sets the share price against it.

The discount is not a market error

A P/NAV of 0.35 does not mean the market is missing two-thirds of the value. Between today's price and the full figure stand four things:

1. Financing risk. The road to production costs money the company does not have.
2. Dilution. That money arrives through share issues, and the share count rises.
3. Permitting. A project without a permit is a project on paper.
4. Time. Five to ten years to the first ounce is entirely normal.

Set all four to zero and the answer is 1.0. Nobody sets them to zero.

The multiple and the discount rate belong together

This is where most accounts stop. It is also where the metric first becomes usable.

The 5% real discount rate customarily applied to gold projects is conspicuously low. For the very same asset, EY arrived at a weighted average cost of capital of 11.5% in a valuation filed with the SEC in 2019. The gap is not an arithmetic slip but method: "it is common in the gold mining industry to consider a 5% real discount rate in conjunction with a net asset value multiple; where a NAV multiple of less than 1.0 captures incremental risk relative to the 5% real discount rate."

The multiple below 1.0 is the risk adjustment. It stands in for the haircut a higher discount rate would have produced. Two consequences follow, and both are missed routinely in practice:

• A P/NAV quoted without its discount rate is not a number but a gesture. A multiple of 0.6× on a NAV discounted at 5% and 0.6× on a NAV discounted at 10% describe two entirely different views of the same project.
• Applying 0.65× to a present value discounted at 10% counts the risk twice. Once in the rate, once in the multiple. The result looks conservative. It is merely double-counted.

Which is why the commodity price assumption, the discount rate and the study stage belong with every P/NAV that is quoted. Without that trio one is comparing the outputs of two different calculations.

The customary bands — and what is actually observed

In practice, bands circulate by stage of maturity. They turn up in every other presentation and on every forum — no standard prescribes them, and no bank publishes them as a rule. Convention, nothing more:

The observed values support mainly the lower half of that table. For the valuation cited above, EY surveyed the multiples analysts applied to eight gold companies in their research — largely producers and companies close to production. The result: mean 0.54×, median 0.40×, range 0.30× to 1.08×.

The median, in other words, sat where convention places the explorer. A table that puts the producer at 0.8× to 1.2× across the board describes a firm market, not a general rule. As an expected value it is of little use; as an aide-memoire for the ranking of the stages it serves.

Where the metric misleads

The NAV is not fixed. Two analysts will arrive at present values a factor of two apart on the same project if one uses the spot price and the other the long-term consensus. P/NAV inherits that spread in full.

Inferred resources. Take inferred into the NAV at full weight and it often doubles on paper within a single line. A discount is unavoidable — how large, no standard says. Thirty to sixty per cent is customary; EY carried inferred resources at 30% of their contribution, that is at a discount of 70%.

Old studies. Capital costs have risen sharply in recent years. A PEA from 2019 frequently understates the capital requirement by a wide margin. See PEA, PFS, FS.

Calculated before dilution. A NAV per share struck on today's share count is too high. It has to carry the dilution expected between here and production.

How we use the figure

We calculate the NAV ourselves — a DCF built on the technical report under NI 43-101 or JORC — and state the discount rate, the price assumption and the study stage in every piece of analysis. Without that trio we publish no P/NAV.

Resource categories enter on a sliding scale: proven and probable at 100%, measured and indicated at 60%, inferred at 30% or not at all. The ladder follows the practice documented by EY and sits at the conservative end of what is customary; it is, plainly, our choice and not a requirement. See Inferred, indicated, measured.

We set the observed P/NAV against the band for the relevant stage rather than against 1.0 — and we treat that band as what it is: a convention.

The full framework is set out under How we value resource companies.

Sources

• Independent Valuation Report, Ernst & Young LLP, filed with the U.S. Securities and Exchange Commission, 2019 — survey of the NAV multiples applied by analysts, discount rate, WACC and the weighting of resource categories — sec.gov
• CIM Definition Standards for Mineral Resources and Mineral Reserves, Canadian Institute of Mining, Metallurgy and Petroleum, 10 May 2014 — bcsc.bc.ca
• National Instrument 43-101 — Standards of Disclosure for Mineral Projects, consolidated British Columbia version — bclaws.gov.bc.ca

Version 2 · 11 August 2026