Sorry been traveling for a while – so missed the 3 unexpected announcements - great news on all 3 - I should go traveling more often.
- Application for expansion via 3 new licenses 1,500 sq Km around Mt Remarkable – this tells me management are as bullish about Mt Remarkable as Moneymade – a very good sign
- Concentration Grade Optimization – 2.11% Vandium Pentoxide, 16.23% Titanium Oxide and 63.27% FeO3 – “The highest vanadium concentration grade of all Australian (Vanadium) Deposits” – this further proves what Possum has been saying on the importance KRC concentration grades for the last several months. (hopefully this will finally silence the down rampers on grades – though I doubt it)
- Additional A$6 million – 50% Underwriting of June Options. If all the options total A$12 million get cashed at the option price of A$0.10 which they should do at the current share price of over A$0.10 then the options of A$12 million + A$6 million underwriting will provide A$18 million cash. Management have done a great job progressing the company with very little – this cash provides the fuel to accelerate all the projects
- Speewah Vanadium and Titanium
-Speewah Fluorite
- Mt Remarkable –Gold
When it comes to cash a bird in the hand is worth 2 is the bush.
I do not blame anyone who sells a shares, every individual has their own target and / or trading strategy - many people once they double their entry price then sell 50% regarding the remaining shareholding as "Free Carry", others sell simply because they need some cash, or change their sentiment on a stock. Others sell because they think a stock has "had a good run" up and is peaking and due a retrace (not helped by the bots) – however with a stock like KRC since 12 March we have seen several false peaks with very little sustained pull back and a seemly insatiable heavy demand from what would appear institutional investors pushing up the price further to yet new peaks. To me we are still in the foot hills of our climb of Everest, we will only reach base camp when the new Speewah Scoping Study is release due next 2 weeks.
I think this is way to early in the KRC story to be selling any - IMHO - Your KRC shares are worth a lot more than you think.
Investing in mining explorers is a risky business, around 80-90% of companies explorers will not make it. Fancy power point presentations, rock chips and trenching samples do not a independently verified JORC report make. Others like KRC even with great management will take many years and the right turn in the economic and commodity cycles with the right minerals to reach the achieve their true promise. Different people have different strategies - some spread their investment into a lot of companies - I tend to do a lot of research and try to sort “wheat from chaff” not always successfully and ultimately tend to invest more heavily in only a very few shares (currently AUZ, KRC & CLA). I try never to negatively compare one share versus another, as nsw004 says I think down ramping/sledging is poor form. DYOR run your own race in life, don’t look over the fence in envy, sometimes it best to keep the blinkers on.
I bought in to KRC at an average A$0.207 and enough to keep the wolf from the door. Having been a bit of a petrol head in my younger days I am now a clean energy advocate EV batteries etc (perhaps old dogs can learn new tricks !) so I was attracted to KRC because of the vanadium, and was somewhat dismissive of the gold - however after the latest new license applications around Mt Remarkable I eat humble pie on the gold and all kudos to Moneymade who always said gold was an important leg to the KRC stool (Vanadium Titanium Gold and Fluorite). I look forward to the new drilling from May on Mt Remarkable drill results I guess in June / July
I have not sold a share in KRC and don't intend to - this has along way to go - and as I have said before, the Scoping Study due shortly will IMHO certainly not disappoint - I believe people will be very surprised just how profitable the Speewah Vanadium and Titanium project will be
I attach below for those who may not have seen it my post of 5th February this year after looking at the KRC 2012 Speech scoping study and plugging in the latest Vanadium pricing - I think I was a tad optimistic on the Titanium Pricing and hence the revenue side
I look forward to the new KRC Speewah Scoping Study due in hopefully in the next 2 weeks – we will soon see how accurate I was or was not.
Hang on to your KRC shares IMHO the best is yet to come. DYOR GLTA – Thai
Date:
05/02/18
Time:
03:54:01
Post #:
30812728
Start of thread
KRC potential valuation:-
Its always difficult to put a valuation on a exploration or mining company especially one like KRC, with great potential but no current revenues. However I thought it might be useful to try to figure out roughly / “back of envelope” what KRC could be worth and start a discussion around this with people on HC Bulletin Board who are much more knowledge than me; so feel free to chip in as there are so many great posters with lots of knowledge.
As mentioned by Blister, perhaps unknown to more recent shareholders, KRC did actually complete pit plans (issued 10 May 2011) and a full Speewah Vanadium/ Titanium scoping study 6 years ago on 23 April 2012 (see ASX website for company announcements) I attach some relevant pages of that 2012 scoping study below. Its worth a good read and print out for your KRC file. However due to the market situation at the time in 2012 KRC mothballed the project until revising it again in 2017 primarily due to the increase in mineral demand and prices particularly Vanadium. We are only now benefiting from all that hard legacy work that KRC did in 2012 and before.
As Stephen said in his earlier excellent post in Jan on the quality of our KRC Vanadium ore wrote (also attached)
“Posters may be shocked by the numbers that eventually spill out of their upcoming scoping work.”.
Not to pre-empt the new KRC scoping study due end March 2018; however I think we can get an initial rough idea of the potential financial impact of the KRC Speewah project now by looking at the 2012 scoping study and updating for some current mineral pricing figures.
2012 scoping study (see attached) assumed the following tonnages of production and prices
Titanium TiO2: 99% purity 75,000 tonne @ 3750 = US$281.25 million
Vanadium V2O5: 99% purity 12,400 tonne @ 13,500 = US$167.4 million
Iron Ore Fe2 O3: 99% purity 410,000 tonne @ 160 = US$65.6 million
Ammonium Sulfate (NH4)SO4 200,000 tonne @ 275 = US$55.0 million
Total Annual Revenues pa US$ 569 million
Total Annual Operating Costs US$ 359 million
2012 Scoping Study Net Annual Operating Cashflow EBITDA US$210million
(EBITA – Earnings before Interest, Tax and Depreciation)
Capital Expenditure/ Build Cost US US$896 (inc 10% contingency)
Payback Period: 4-5 years
Internal Rate of Return: 23.4%
Other assumptions:
- Exchange rate of A$1 = US$1
- Mine Life 100 years + (Note recent interview with Board Member they “gave up calculating on LOM after 1000 years”. It does mean that they could double or quadruple the 2012 Scoping study production and still be 250 years+ LOM (i.e Speewah resource base is massive largest in Australia certainly one of the largest Vanadium deposits in the world)
2018: Using 2012 Scoping Updated for Current Titanium and Vanadium prices.
(note I have used metric tonne conversions 1 tonne = 1000kg & 2204lbs.)
The great thing about mining companies in a rising commodity/ mineral price environment is that assuming the same ore processed, ore grade and production figures, the increase in metals price drops strait to the bottom line, so applying the current metal prices for TiO2 and V205 to the 2012 Scoping study I get
- TiO2: 99% production 75,000 tonne @ US$4,800 per tonne = US$ 360 million
- V2O5: 99% 12,400 tonne @ US$28,652 per tonne = US$355 million
- Fe2O3: 99% projected price @ US$160 per tonne = US$65.6 million
- (NH4)2 SO4 ; not given @ US$275 per tonne = US$ 55 million
Annual Revenues based on updated TiO2 and V205 pricing US 835.6 million
Less Annual Operating Costs US$ 359 million
Net Annual Operating Cashflow EBITA US$ 476 million
Assuming the same Capital Expenditure/ Build Costs of US$896 project payback period would decrease from 4-5 years to 2 years or slightly less.
Typically I would use a 6 X EBITA valuation however given the 100 year + LOM (life of mine) & a 2 years project payback period I think even a 8 X EBITA would still be conservative for this KRC Speewah project.
So EBITA US$476 X 8 = US$ 3,808 million @ US$1/ A$1.25 = A$4760
Current Number of Shares in issue approx. 1130.5 million
+ projected dilution via issuance 124.4 million of options due June 2018
= June 2018 Shares in issue approx. 1254.9 million shares
= KRC Valuation with Speewah in production enterprise value A$ 4,760 million / shares in circulation 1.254.9
= Project value per share A$3.80
However conservatively assuming a highly dilutive 50/50 JV to develop Speewah would be worth 50% of this so MC A$2,380 million and A$1.90 per share less of course any further share dilutions.
Notes
Given management’s large stake in the business, high profitability and rapid project payback period I assume they will keep dilution to the minimum. (i.e will fund as much as possible of capital costs with debt rather than equity)
Note the Options due in June 2018 will raise approx. A$12.7 million i.e at A$0.10 per share if exercised (only worth option holders exercising if price in June 2018 is over A$0.10 per share.)
I have not changed the Expenses assumed in the 2012 study. The capital/ build cost assumed a 10% contingency price and a exchange rate of US$1 = AS$1 as I assumed the US$ imported equipment would probably be off set by the lower A$ local build costs. The Annual Operating costs I have also not changed although they may be lower as labor paid in A$ would be lower when convert into US$ at current exchange rates, plus we don’t know the updated metallurgy costs of getting to 99.5% TiO2 & 99.5% V2O5
I used 99% rather than 99.5% titanium pricing and 98% China Vanadium flake pricing versus the 99.5% Redox Battery grade Vanadium we are aiming for, as that’s the only pricing I could get. I assumed same pricing for Fe2O3 and (NH4)2 SO4 as I could not get accurate pricing for these (it seems to vary widely based on quality)
These number are only hypothetical / back of envelope – and I look forward to the real KRC Scoping study due from KRC at end of March – however it gives an indication of what KRC’s valuation/ stock price could be once we are in production at Speewah and tells me the current stock price is currently very undervalued.
However to me its shows KRC with its Speewah Market Cap in 2-3 years could IMHO conservatively be worth circa A$ 2,380 million equating to a share price of A$ 1.90 conservatively assuming a 50% dilution for a JV and assuming current rather than projected Titanium and Vanadium mineral pricing.
+ Gold + Fluorspar + other potential minerals i.e Copper
So what’s KRC worth today if the above is correct –
> End of March hopefully with metallurgy confirmed that we can reach 99.5% Vanadium Oxide and publishing of the official Speewah Scoping study hopefully showing similar or better profitability then I think a MC of circa A$250-300 million circa A$0.25 per share seems reasonable.
> Confirmation of Finance to Build Speewah and ground breaking of mine MC of A$500 circa A$0.45-0.50 per share seems reasonable given discount for 24 - 30 month build time, with an increasing share price as we get closer to mine commissioning/ operation.
IMHO - KRC is in an increasingly good spot & all the stars, are after all these years of hard work, are finally aligning in KRC’s favor. We have :-
- We have a good and long serving Board and Management team with much skin in the company.
- We have with Titanium and Vanadium fairly rare and very high demand products with a rising price. Vanadium projected to increase further to circa US$20 per lb by 2020
- We have a surface/ low strip / low cost mine with 1000+ year length of mine LOM/ mine life
- We have once processed a very high quality ore one (much better than it initially looks – see Stephens note on the ore below)
- As others have noted we have a clear and much better than many route to market / export route 30kms off the Northern Highway then 170km to Wyndham Port (Note until recently 2016 Wyndham was being used to export large quantities of Nickel – so KRC mineral products should be no problem to handle and require little if any port changes.
The key unknown now is the confirmation of being able to produce a 99.5% battery grade Vanadium oxide – hopefully this will come. If KRC can achieve 99.5% Vanadium Oxide the high product demand and profitability and fast payback of the project should attract the finance required.
There is still much work to be completed impact studies and approvals, mining license, native titles other finance/ JV agreements, probably new road works from the North Highway, mining camp/ accommodation to be built/ air strip, electrical power solutions mine and plant build and testing/ fine tuning debugging etc. minimum 24 -30 months from investment decision that will hopefully be in July this year so hopefully in production mid July 2020 (Those with mining experience please advise if you see this date as feasible)
I have only dealt with the Speewah and the original scoping study as my main interest is EV Battery mineral investments and it’s obviously easier to put a value on a 2012 KRC scoping study based on already completed JORC resources and simply updated for the current Titanium and Vanadium price, than try to put a value on our KRC gold discoveries that still require much more drilling to fully quantify JORC the total Gold resources.
Obviously Money made and others with more Gold knowledge will have better idea of what KRC’s gold maybe worth though from a resource point of view its still ‘early days” and that will change as we get more drilling results and proving up and hopefully a JORC 3rdParty resource assessment of gold in place.
Strategically its also interesting as AUZ shareholder to see AUZ’s recent plans to FOCUS on the EV/ Battery space minerals through their 3 projects Sconi, Flemington and Thackaringa by:-
- Free floating their gold assets into a separate company with all AUZ shareholders getting pro rata free shares in this new gold company.
- Hanging a for sale sign over their Marriotts Nickel project
In my opinion the analysts and major investors want dedicated focus on core assets, as the sum of the parts of a widely diversified portfolio is usually worth more separated rather than kept as a whole. With the high competitive customer demand for EV/Battery minerals I believe that AUZ is also looking at innovative less dilutive options to funding mine development and these could apply to KRC. IMHO these are decision that KRC management may look at down as we get further down the track.
Many thanks to all KRC posters I enjoy your posts and I hope this is useful. IMHO - its going to be a great future for KRC your share are worth more than you think – hang on to them. After so many years of toil and strife for KRC and its long term shareholders they deserve the reward I think is coming. Cornwall here’s to you getting your money back and hopefully a lot more.
GLTA DYOR
(20min delay)