So the Capex requirement for each stage is as follows:
- Stage 1 - 62% DSO - $12m
- Stage 2 - 65% Fines - $20m
- Stage 3 - 68% Concentrate - $150m
- Stage 4 - HISMELT - $150m
Margins are as follows:- 62% DSO - $67 in 2021-22
- 65% Fines - $87 in 2021-22, $47 for 2022-23, $27 for 2023-24 onwards
- 68% Concentrate - $69 for 2022-23, $59 for 2023-24 onwards
- HISMELT - $170
If MGU, only ever did upto stage 2 (65% fines), so a Capex cost of $32m, it would have the following EBITDA.
- 2021-22 (250kt @ 62%, 40kt @65%) - $20.2m
- 2022-23 (2.4mt@ 65%) - $112.8m
- 2023-24 (steady state) (2.4mt @65%) - $65m
NPV based on this would be around $600m. That alone is close to 10x upside. I have assumed no dilution in this scenario as operating cashflows could find Capex.
If MGU, only ever did upto stage 3 (68% concentrate), so a Capex cost of $182m, it would have the following EBITDA.
- 2021-22 (250kt @ 62%, 40kt @65%) - $20.2m
- 2022-23 (960kt @ 65%, 1,140kt @68%) - $123.8m
- 2023-24 (steady state) (960kt @65%, 1,440kt @68%) - $110.9m
I went through the HISMELT scenario before which had a NPV close to $1.7 billion and close to a $2.50 share price, which is a 20x upside from here.
A lot of this analysis is predicated on fairly low cost and iron ore prices staying around the $100 mark long term. It will be interesting to see what the actual cost comes in at.
We are using a 62% FOB cost of $46. MGT in its recent PFS had a 62% break even price of $54, so the number I am using could be a bit too low.
Any thoughts or feedback would be great.
(20min delay)