valuation from fergus

Hi Ferg....

In Feb 2007, when the SP was about what we are seeing at the minute, you wrote...

"...I said 'having reached my previous target of ~14c I consider APG a hold'. Yet the previous target I actually posted was 9.3c - 11.8c, reflecting a probably range of 60%-80% probably of a 60k tpa ERMS plant being built (value = 7.3c - 9.8c per share) , plus a 25% probability of an EARS process opportunity (value = 2c per share).

So I want to take a second to explain the difference:

My 14c target is based on:
1. Keeping the same value estimate for the EARS process (i.e. 2c per share); but

2. Increasing the estimated NPV for a 60k tpa ERMS plant from $76m to $126m - to reflect the new (well actually old info) I found in the 2005 MD presentation.

Assuming the same range 60%-80% probability, this equates to a per share ERMS value of 12.1c - 16.2c.

Adding the 2 together (EARS + ERMS) you get a current fair value of 14.1 - 18.2c per share."



How much of this value estimate holds now that 6 months has transpired? My impression is that you would need to lift the EARS probability considering the One Steel agreement. Also, the probability of a 60ktpa plant would be at the upper end of your range considering the BHP announcements, Also, the timeline in MT's July presentation shows multiple EARS plants. Also, BHP have made stronger noises re payment of royalty for Corridor Sands, so that implies the need for a probability of income from a, say, 300ktpa plant.

Any updates, oh master of the spreadsheet?