100% of cockatoo!, page-164

G’day all.

Like many others, I hadn’t looked at the market since before Christmas & missed those announcements:
This announcement means they now have the funds to not only pay out the deal ($3m), that brings back the other 50% of the operating Cockatoo project, but also it will pay for the sea wall that is due for construction in this quarter.
http://www.asx.com.au/asxpdf/20121228/pdf/42c65rxllkw24s.pdf

& here’s the ann. where they have regained 100% of Cockatoo island.
http://www.asx.com.au/asxpdf/20121228/pdf/42c660lcqj20rw.pdf

It’s good to see that the sales & Marketing agreement they have with WEG stays in place as well. I suspect WEG aren’t thrilled about what’s happened, but it seems WEG didn’t fulfill one of the conditions precedent, so it’s really their fault & our good luck they didn’t, so Tony could do that great deal to pre sell another $17.2m

I would say that once the market does catch up with these bits of news, that we could see a bit a modest increase in SP. I still think it will take a while for them to prove to the market that they can consistently deliver. They also need to do some drilling, but with that $17.2m pre-payment now available, that should be no problem.

I had done all my calculations with them owning 50%; so 100% will make their profit soar. The other bonus is the IO price; around $120 when I bought back in mid-December, is now around $150. Any increase just drops to the bottom line.
Indeed, $150/ton IO, adds around $30/ton in profit (from my original $120 estimate), that drops straight to the bottom line. Based on their shipping schedule, they will ship 946,000 tons in this calendar year. That’s an EXTRA $28.3m profit! OK, IO has to stay at/above $150 for that, but right now IO price is heading one way & that’s UP.
Market cap still a modest $60m & won’t stay there if IO price stays up, as PE will be not much over 1.
It was mentioned at the recent AGM that they are keen to put 8-10 holes into the underground area to get a better understanding of just how big it is. I would say with this unexpected (from the market’s point of view), new $17.2 available funds, that the drilling may be done soon.

So Pluton now looking VERY good & if they can prove up more on Cockatoo as we expect, then a decent re rating should occur sometime this year. Plus all the upside in Irvine in a few years. Still has plenty of risk of course. But for me, risk/reward looks good. I now have 3 lots, with today’s lot bringing my avg cost up to 24.5
1-2 years for full value imho. Depends on a few things, but if as seems possible, IO price stays at/above $150 & those new holes prove up enough to enable shipments of 1.5mtpa (3 ships at 129,000t each, as starts in December this year), EXTRA profit from IO $150 alone will be $46m. So you would expect they would be making at least $14m at $120. This would mean annual profit = market cap! Then it depends on what multiple the market gives junior IO producers. Whatever multiple that is, that’s the multiple there will be on the SP.
A large seller has come on this morning at 26 & then loaded more at 25, so those looking to buy/top up should be able to get set at or under 25.
BUT, there's still plenty of risk, as we know. But what we’ve seen with those announcements is further confirmation that we have top class management. For me management is #1. That’s why I bought more yesterday.

The new pre sales deal & retrieving the other 50% of Cockatoo are MAJOR wins for Pluton. I would like to see an updating presentation early in the year. Indeed the best of the emerging juniors where we made heaps, kept the market very well informed with regular updated presentations. Arrow energy (AOE), was probably the best at doing that.
I’m close to my maximum $’s in the market now (5% of my portfolio in my super bearish state), but I might squeeze a little more, if SP drops any further.

As for the sellers; those new large lines came on almost as soon as I had bought. Gottsy will confirm my short term timing sucks (I moved CBA 3% one day many years ago), but I do OK long term. Obviously for every buyer, there’s a seller. I had a look at trading over the last year & I see around 11 million traded in October mainly 14c – 17c (avg. around 16.5). We’ve only traded 2.1m since those great ann’s on 24th. So likely some of those who bought lower down taking some nice profits. Might also be some who bought earlier in mid 20’s selling when they get even. I’ve seen a lot of that over the years; people buy a stock, only to watch it fall & keep falling. Then when it turns around, they are relieved to be able to “break even”. In any case the selling & buying doesn’t influence what the company is doing on the ground.
For me, Pluton story now looks even better than when I first bought in December. Management are kicking goals & I will back them to continue to deliver. Now comes the hard yards; to consistently deliver month on month to their stated shipping schedule. Likely we’ll see some slip ups, but these are to be expected in any new operation. Market reaction will depend on how well management handle these issues. It will take quite a few months before the market sees (& believes) PLV management CAN deliver ongoing. When the market accepts PLV as a credible IO supplier, then we’ll see the SP soar.

as usual;
CAVEAT EMPTOR - risk in all Investments.
Everyone should seek professional advice & not make investment decisions based on what they might read on an Internet chat site, or receive from me (who is just an enthusiastic amateur).
Remember, this information is probably worth what you paid for it.

cheers,

ned