valuing marampa, page-8

Sen00,

Great find mate.

Interesting that TS says +$600m capex to get to 5mtpa.

On those numbers Marampa is a mini SDL:

tpa 14% SDL (5mtpa/35mtpa)
capex 15% of SDL ($600m/$3.8b)

Thus with Southern Cross's target price for SDL of $2.14b then 14% for Marampa represents $300m, however add:

(1) shorter time to production (IMO)

(2) Possibly lower opex due to proximity to port for Marampa (<100k) compared to SDL at 350-400km (SDL will probably benefit from economies of scale on the mine site along with no need for benefication so maybe not)

(3) The other thing to take into account is that SDL's DSO is 62% vs. Marampa's 64-66% (after benefication). My understanding is that anything above 62% is currently attracting an $8 premium per tonne for every 1% above 62%. Thus 64% would earn a $16 per tonne premium and 66% would earn a $32 per tonne premium(from recent WPG presentation - please correct me if I am wrong here).

At 5mtpa this would equate to a value 'premium' of $80m-$160m pa over SDL based on Marampa's 5mtpa @ 64-66% Fe.

Maybe 1-3 will add the extra $$ that TS is seeking.

Cheers
John