have pilferred this post from another forum,I am not the author of it-
Hilarious thing ... Nickel moved 79 cents up per lb on Friday .... So this deposit with 2.05 million tons of it and 150k tons of cobalt .... lets call it 2.2 million tons of Nickel ....
thats 2.2 times 2204 = 4.848 billion lbs
So 4.848 billion times 79 cents @0.8330 = AUD 4.597 billion
basically the in ground value of this deposit on paper rose over 10 times the total market cap of the company.
Just for the record 2.2 million TONS of Nickel equiv at Fridays close of US$23.27 ... 4.848 billion lbs = USD$112.81 Billion @0.8330 = AUD 135.4 billion
So we have a company with an in ground value 135.4 billion ... reasonable grade as well and the portion of MLX market cap made up by the Nickel side as opposed to the Tin and Royalty business ... is somewhere around 200 mio ... about half of MLX's market cap here.
200 mio vs 135.4 billion .... = 0.14%
Bravo ...
Of course the spot price has little do with anything since development when it happens will be 2011 or 2012 depending on how fast their Chinese partner can make things happen.
The spot Nickel price is at this early stage a bit of an aside ... however with the difference between the two and market cap of the company it is amusing to watch.
Market I suspect still in disbelief about the deposit. Kind of like AQA and its coal deposit back in 2002/3 ... call up a weekly chart. slight difference for me with this one ... AQA back in 2003 was a peanut and had to sell 50% then half the other remaining 50% to get CVRD into the project. Call up a weekly chart and its amusing anyhow.
With the AQA coal deposit it was barely defined with very few previous drill holes. MLX prior to its 400 odd holes last 12 months had a total of 2,500 holes fully defining this deposit done by INCO. And the JORC sits in the top two categories so no more infill or defining drills need be done.
A few things from recent announcements. MLX tried the top and failed in spectacular fashion late Tuesday. Seems with the price of Nickel well down on Thursday as opposed to the bounce back on Friday one large holder decided to sell down below the 5% holding they had. If one notes the liquidity at the sub 40 cent price on the close there was 2 million on the bid down to 36 cents and 176k on the offer. JP Morgan US on the other hand lodged a new substantial holder notice kind of wiping out the boutique fund managers holdings when one of the 10 largest banks in the world is now a substantial holder.
Second the Jinchuan deal is now expected to be finalized in May.
An outside but the Goro deposit in New Caledonia which INCO now owns which has been a problem from the start due to its location and lots of green groups ... CVRD announced its going to pour another $1- billion into it to try and bring the project into production at the actual planned date after being held up yet again by strikes and protests from everyone from green groups to the natives.
This deposit in geology and grade is almost identical to MLX's one and despite a remote location MLX's one I doubt gets into anywhere near the strife. MLX as opposed to CVRD has excellent relations with the local aboriginal landholders. They see it as a very good delay for them and their community long term and suspect they get a royalty off production when it goes ahead which will ensure financial security for their people for generations along with much needed employment. Nothing like a 0.5% royalty or 500-600 mio over 20 years to ensure a good deal both sides.
With the latest cash-flow reports been trying to struggle with the structure of the company and what goes where. basically has a market cap fully diluted of 400 mio. the Nickel portion i suspected represent 200 mio of this.
Its split up into three sectors and first and easiest is the royalty stream from Nickel and at present its running at 3.5 mio per 1/4. Or 14 mio per annum. So at least a value associated with market cap of 100 mio if not more. It has to be noted on one hand one of the streams finished late 2009 but on the other hand the Mt Keith Expansion will add 60% to the production totals and it has no expiry date and 20 years or so to run ... so the market cash-flows even at 8% NPV well over the 100 mio mark.
TIN ... Something I have and had never looked at I suspected this made up another 100 mio of the market cap right here of MLX's price. Sadly I was wrong. All of course dependant on the price of TIN verses AUD. Bluestone Tin .... or the old MLX had three mines and one reworking of tailings things on their books. One was a very low cost $6,000 AUD per ton thing from Collingwood in Qld and the other three were at AUD$8,500- per ton AUD to produce.
In short the Collingwood project has been brought on line and everything paid for and will be producing around 3,000 tons of tin with a very very decent profit margin for the next 3-4 years. of course dependant on the spot price of tin but the spot price at present is AUD$16,000- per ton so the cash-flow is going to be considerable.
This added to the royalty stream of the Nickel I suspect will have something of the order of 14 mio for the royalties plus 20-30 mio for the Tin side. Obviously a lot dependant on the Tin price but some serious cashflows. 25-35 mio next couple of years.
The Tasmanian deposits were closed down late 2005 when the AUD/TIN price fell below the cost of production and hit AUD$7,000- per ton.
Without MLX spelling it out on the TIN side they clearly intend to reopen the Tasmanian mines since the profits certainly are there. The two deposits one Underground and the open cut one with 1.9 million tons at 1% ish grade and they hope to produce something of the order of 25,000 tons of Tin. Certainly a higher cost base than Collingwood but they seem to have spent a lot of the estimated $25- million needed to bring this back into production already. Anyhow ...
What the plan appears is for Collingwood and cashflows off the Royalties to open these two mines. On top of this they have a re-treatment of old tailing's 18.4 million tons of it at 0.42% grade and 55% recovery a further 42,500 tons of tin. To bring this bigger project up to speed will cost 50 mio. Again I suspect they use the cash-flows of Collingwood to pay for one then the other.
Bottom line my 100 mio price-tag on TIN operations might have been very low. Even at say AUD$15,000- per ton the potential cash-flow to the company and the plan seems fairly clear at this stage. Potentially we have 10,000 tons from Collingwood and 25,000 From the two Tasmanian ones plus 42,500 from the tailing's all being produced by 2012. The potential cash-flow just when its needed to bring the Nickel on line 77,500 tons of TIN ... even at AUD$9,000 cost per average despite the very low costs for the retailings and Collingwood as opposed to actually having to dig the stuff up ... verses a spot of $15,000- .... hmmm the potential cashflow is AUD$465 mio profit.
So maybe I have erred too far and too low on this side of the business. A side I haven't looked at before mind you.
Here is a chart of the AUD/TIN price which will determine the fate of this side of the business. It does however look very positive and the forwards price of TIN is not at much of a discount to the spot price and in fact they could cover their exposure certainly for a few years and lock in these cash-flows which given their past experiences with the spot tin prices they may very well cover a fair proportion of forward estimated production when they go ahead.
Here is an indication of the Forward Tin market ... slight discount to the spot but not a hell of a lot .... 6% for 15 months.
http://www.lme.com/tin.asp
The mines Tasmanian mine is mothballed from just Dec 2005 so the ability to bring it up fairly quickly is there and late 2008 is the number they are talking about. They dewatered the mine last quarter the underground one and the main deposit is open cut ....
Not sure where I would price a business which has clear plans to produce 10,000 plus tons of tin 2008-12. Certainly in the right place right now ..... with this ability.
Here is a good article on TIN and the demand has been growing for some time at 6% plus per annum. Much like many other metals this sort of demand growth and its unlikely to change unless China stops which is unlikely.
Best case ... on the tin side with the added Nickel royalties we see profits of the order of over 500 million by 2012 for MLX. This when I worked it out was a fair surprise given the markets baulking at the development costs of the Nickel deposit being $1.6 billion is one thing I suspect has made many not take any notice of this deposit. Doesn't matter that BHP poured $2- billion into Ravensthorpe a deposit with a grade 50% lower than MLX's same sort of laterite deposit ... or INCO with a deposit smaller has poured $3- billion into trying to catch up lost ground 2006/7.
Either way I suspect MLX without even the Nickel deposit I was in error placing such a low market cap on the tin side.
Tin is not sexy .... but its clear Tin demand like most things has gone up and the small holdings by which Tin has traditionally been produced cannot keep pace and in fact the output of the small operations is dwindling as the reserves are depleted.
Really strange thing is the total recoverable TIN owned by MLX is in fact approaching double the number I used to work out the cashflows.
Rennison Bell ... the one which is underground and has a cost of $8,500- ton to produce .... well the mine is already there and has been in operation for 100 years but mothballed ... ever wonder how much tin is still down there ... I just used 77,500 tons for all MLX TIN properties ....
QUOTE Renison Bell was the world’s largest underground tin mine, with an estimated pre-mining resource of 26 million tonnes at 1.46% Sn, while Mt Bischoff had an estimated pre-mining resource of 10.5 million tonnes at 1.1% Sn. The ore bodies at both Rension Bell and Mt Bischoff comprised cassiterite-bearing massive sulphide lenses that are electrically conductive, allowing detection by EM surveys.
MLX owns them both by the way.
They did start exploring to extend the size of the deposit just prior to the price of TIN taking a dive last time and hit shall we say some interesting intersections. The above was the size pre mining .... current reserves of the underground part are global resource of 4.1mt @ 1.76% Sn. Basically doubling the contained Tin content side of the company from the numbers I have used ....
Some of the drilled but not followed up intersections they had prior to the collapse last time in Tin prices were .... Bluestone has identified 10 areas that warrant additional drill testing. Many of these are to follow up previous drilling such as the Deep Federal lode with previous intercepts of 18.3m @ 2.1% Sn, 6m @2.4% Sn, the South Bassett area and Area 4
And
3.8m @ 6.52% Sn from 276m 11.6m @ 4.4% Sn from 232m 9.1m @ 1.67% Snfrom 186m
Since some of these extended the known size of the underground deposit outside current boundries it woul appear likely the Contained metals recoverable is likely to exceed 100,000 tons just from this alone.
It cannot also be stressed enough ... Olympic dam we all knew was large but when you have 10 years or more of known reserves and the price is deflated and the company struggling like WMC was 2001-2003 despite the deposit you don't spend anything on worring about increasing reserves by spending it on expensive drilling. MLX tin deposits are not in this category but they were existing basically hand to mouth from 1990-2005 and expended little in this direction but the little MLX did spend when things looked up early 2005 suggest the known 350,000 tons of contained tin of which most has already been mined there seems to be at least 75,000 tons very well defined and likely 100,000 tons and possibly a lot more but until they spend the money it remains unknown.
Like many things ... virtually every commodity the price of TIN sat and sat and sat US$5- per lb $6- per lb from 1985 to 2000 and then along with everything else got slammed in 2001 down to US$4- per lb. That's over a 15 year period ... not any movement up whist the cost of producing kept creeping up and up and up. The Tin mine went from being very profitable in 1980's to marginal in the late 1990's to s loosing proposition in 2001-2 and wiping out not one but two companies post 2000. MLX picked up the pieces.
A contrast is WMC with the worlds premier mine Olympic dam .... during the same period it in fact also nearly went broke due to low metals prices. Somewhat different now for it and the value of Olympic dam.
Not suggesting the TIN side of MLX should be looked at in this light but when the AUD TIN price stubbornly was at $5,000 AUD per ton in 2000-2003 no wonder they went out of business. slightly different story with the price at AUD$16,500 per ton and a recent high of $18,000 per ton and a realistic updated cost per ton to mine the most expensive of MLX's deposits at AUD$8,500 per ton down to $6,000 for Collingwood and not too far away for the retails project.
Since the processing mill is intact and on care and maintenance and the incline and mine shafts are all well established and they just dewatered the lower portions of the mine and upgraded the systems at significant costs last quarter ... numbers buried in the production costs numbers in the cash flows .... the potential is to see a 10,000 ton per annum operation very quickly come to life. Not much of a dent on the global demand side which is growing at this pace per annum but it will replace some of the falloff in the small Malaysian and Indonesian tin miners production as they run dry.
Total production potential as such with the drill results and current resource estimate of underground portion of Renison Bell far larger than I thought .... 100,000 tons Renison Bell likey 30,000 tons Mt Bischoff likely 10,000 tons Collingwood 16,000 tons Gillian 42,500 tons retails project
198,500 tons of TIN.
Do love these in ground value things .... AUD3.275 billion.
In this case its already a producer via Collingwood .... likely to get the two first Tasmainin ones up late 2008 ...... at 10,000 tons of production per annum 2009.
What value ? the TIN side .....
On in-ground and close to production at least 10% 327.5 million value ... Potential peak at 15,000 tons per annum production but likely use a 10,000 number conservative AUD$12,000 AUD per TON metal price vs $8,500 average cost ... around a $35 million cash-flow per annum low end .... P/E of 3 ... Suppose the 100 mio price tag being ultra conservative not too far out ...
but the other side since they can hedge it ... at $15,000 per ton which I suspect they do for the first few years at least ... using an average production say 15,000 tons per annum for 10 years ... top end stuff .... 97.5 million cash-flow per annum .... after costs at p/e of 3 roughly AUD 300 mio.
Take your pick.
Somewhere in-between the two and more leaning towards the upper end myself.
Bottom line after all this it has minimum $350 mio from Tin plus 140 mio from Royalties over the next 10 years to devote to developing Wingella Nickel deposit. AUD 490 mio.
Top end it has 97.5 mio plus the 14 mio Nickel royalties per annum average and a whopping $1.15 billion to devote to developing Wingella. that's off AUD $15,000 per ton average.
We stay here recent last 3 month average AUD $17,000 and usuing the top end production number of 15k tons per annum .... = 127.5 plus royalties of 14 mio = 141.5 million or positive cash-flows of AUD$1.415 billion over 10 years.
Not put out too much by the large capex number to develop Wingella after doing this.
Possibly the last of the tin side projects I expected to be up was the retails project due to the capex costs involved but I was scratching my head with he accounts and why the costs were so high .... until I came across this gem ....
QUOTE Commercial scale gravity machines have now been ordered and delivered is expected to take place in the third quarter to complete the scale-up testing of remainder of the processing stages.
300 ton per hour ones by the way .... about half what I expect them to reprocess at ...
Do with this what u will.
Just thought I would go through all of it.
First step is the funding Jinchuan for the full BFS plus money to drill all the targets in the Musgraves of which there appear to be a lot.
Also impacting on the BFS was the Calcrete discovery which will lower the cost of production to a fair extent ....
What they said ... This discovery is significant in volume in that it is expected to contain enough material for many decades of application and should have a substantial impact in lowering the operating costs of a proposed plant.
Enuf .... best of luck
A lot depends on the TIN side on the price but at more than double the average cost of production right now and a strong demand side it ain't going to flop I suspect.
Wingella and Nickle side early stages but taking USD 50 cents of the cost of producing a lb due to calcrete discovery if not more makes it even more attractive.
At this stage no broker covers them I believe and most dropped them like a hot potato when the Tin price went the down harder than most other metals late 2005 30% vs 10% for Zinc and copper. Where the long term TIN price ends I suspect like most other metals a reasonable call is double the stagnant 1990-2003 levels. About US$3- per lb ... so suspect given it costs more to produce nowadyas than it did in 1990 .... US$6- is reasonable or US$13,224 per ton @8300 cents I vote for AUD $16,000 per ton :}
No different to my own Zinc or copper or lead long term price outlooks. Basically double and then some for the long term price. Could very well be with Tin like most things needs a kick in the pants to get some new production and as such a higher price even than here.
Nickel on this basis same thing except the cost base due to the Suplhide deposits being mainly mined out and Laterite ones being twice as expensive to mine and requiring large capex I think a long term average price of US$12 plus is appropriate if not more.
Sounds stange expecting the price to halve longer term but thinking even then something is way undervalued. At 40,000 tons even at US$12- in 2012 lets say ... NEt profit before tax will be something of the order of 900 mio pre tax. And a 40 year mine life. Thats why I see value even at half the price. Quite possibly if the demand growth numbers are even close out to 2012 for Nickel. Of course outside Wingella they have barely scratched the surface of other things in their tennaments and when they talk about large Suplhide Nickel shows as they did in the quarterly .... boy oh boy.
Not sure how much dilution MLX will suffer to get the mine up and running given the TIN outlook. Stand alone tin only with royalties I suspect we have the Nickel deposit thrown in for free.
Cheers
I own .... High risk ... long term ... lots of if's whats and buts ... watch the AUD TIN price ... watch the drilling outside Wingellina ...
Do your own research ...
MLX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
(20min delay)