MGT (ASX) MGT TAKEOVER?? TARGET 4B Tonnes iron ore

Originally posted by 1912: ↑

Chillaxed - a big day today...

Yours is a good question - my view is that an ASX listed entity with a market cap of less than A$5m at the time would have had difficulty raising $20m on its own behalf without the assistance of another player ....it's the old story of keeping 50% of something that "will" happen having more certainity than trying to keep 100% of something that "may" happen - unless they are good at "marketing" - which I think MGT can always do better - this is all IMO.

Without going over old history, outlined previously, there is a new broom driving this one with a different philospy - instead of trying to be the biggest and best producer costing several billion to establish, they have completed a scoping study reverting to a smaller staged model that would cost substantly less (maybe US$400m to implement) by initially mining 2m to 4mtpa that could in the main utilise established infrastructure which is reasonably nearby (whencompared to what the Pilbara iron ore producers faced when they started) and upgrading that as required.

What makes this profitable is the actual margin between cost of production and the end sale price (usually new projects have an offtake agreement in place with a purchaser/s) and as I have suggested previously the suggested numbers are quite staggering and of course very variable ....even a 50% return of an annual surplus of say US$75m (using 2.5m tpa at a low operating margin of US$30 pt) and @ 71.5c to the US$ = A$100m pa approx - divided by 50% for our share = A$50m pa - not bad for what was an ASX company with a market cap of less than A$5m.

For me these maybe very low numbers and the exchange rate is variable - if for instance the actual cost of production was US$50 (note FMG produce at US$13 pt) and the sale price was a nominal US$70 pt plus the additional US$25 pt premium for Fe 68.5% grade then that equates to a net margin of US$45pt (US$95 less US$50) - again note today's equivalent sale price would be US$118 pt plus US$25 pt = US$143pt less a cost of production at US$50 pt for a margin of US$93 pt and at 2.5m tpa = a surplus of US$232m pa or US$116m for 50% of the project or @ 71.5% to the $ = A$160m pa- who actually knows what the ongoing iron price will be ? .... however what is known the demand for high grade pellets will always attract a premium during a period where climate change ensures overseas steel miners will require more higher grade product to assist them in their efforts to achieve tlower emissions.

IMO the increase in today's market cap has been soley due to the write up by Barry Fitzgerald in his * Mining Paper bringing the project to a larger audience and either a combination of a major player entering the market and/or day traders.
As an aside, It is interesting to note the RFC Ambrian "farm in offer" is not set in concrete yet since they have 4 months to find their first $5m to earn a 30% interest in the project and this time will expire next month to be followed by a further requirement to find another $5m to earn an additional 19.9% interest - if they do not perform another partner will have to be found or, as some have suggested, a take over may occur - however that will need to be an attractive price well in excess of the latest SP to win over the major share holders - there is always a premium to be paid in a take over situation if that was to occur.

Note the area that makes up the Razorback Iron Project forms only part of the 110km strike length of MGT's holdings giving rise to the potential to increase the existing 3.9Billion tonne Jorc resource outside of the RMF "Farm-In Offer"

I note RFC Ambrian were advisors to FMG in their takeover of Atlas (another iron ore producer) last year and FMG may be the ultimate party involved with them - who knows.

However based on my own rough calculations, an ASX entity that earns A$50m pa surplus should have a share price well north of the .003c per share price (a $5m market cap) that it was trading at when I first raised the low market cap issue and the potential of the Company still stands IMO - at around 7c to 10c per share (suggesting a potential future market cap of from around $220m) ..... all IMO - I'm not an advisor - do your own homework.
I have been out most of the day and have sat down to pen this after trading closed today, the strength of which has surprised me.

I note the Company was issued with a speeding ticket from the ASX and their reply being basically - "everything has previously been reported to the market" which I do not doubt.GLTA - patience is always required with these junior stocks......see what the next weeks and months bring - it's been an awakening today.

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Price($)	Vol.	No.
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0.330	33657	1
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(20min delay)
Last 30.5¢		Change 0.005(1.67%)		Mkt cap ! $30.02M

Open	High	Low	Value	Volume
30.0¢	30.5¢	30.0¢	$51.59K	169.3K

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