sdl valuation, page-32

Hey leon,

one of esteemd posters (bigstar) some time ago posted some valuations on HC. Something that has not been spoken about is the IGV which may be attributable to SDL's resource.

Everyone here is talking about discounts to NPV, but valueing it "ground up" using conservative metrics supports a price between $0.56 and $2.18 compared to this $0.50 lowball offer.

I provide an extract from that post here -

Quote...

Part II
Projection SP using Enterprise Value (EV)
A simple valuation approach we could use to complement the DCF valuation:

-Number shares = 2,800m
-Parity A$/US$ = 0.9
-Current share price = A$0.14 = US$0.12
-Total resource = 2,740Mt (415Mt DSO + 2,325Mt Itabirite)
-M&I resource = 2,740Mt (415Mt DSO + 2,325Mt Itabirite)



Using Valuation Metrics from Ambrian analysis, we can determine the index factor IX (or multiple) of EV through
different phases:

Pre-BFS --> Pre-production (Post BFS) --> Production

IX could be interpreted as a risk factor or a multiple factor of an EV.

Lets called EV1 = Enterprise Value for Phase 1
EV2 = EV for Phase 2 = IX * EV1
EV3 = EV for Phase 3 = IX * EV1
where IX = (1 + %increase)



Projection SDL SP for Base model
-Total resources = 2.7 billion tones (415Mt DSO + 2,325Mt Itabirite)
-Parity A$/US$ = 0.9

Lets take a conservative approach by using the EV total resources instead of EV M&I (Minerals & Indicated):



Using EV Total resource (conservative approach)
Pre-BFS
EV = US$0.53 x 2.7 billion tones = US$ 1,431m
--> SP = US$0.51 = A$0.56

Pre-Production (BFS: Funding approved)
EV = US$2.05 x 2.7 billion tones = US$ 5,535m
--> SP = US$ 1.97 = A$2.18

Production
EV = US$4.96 x 2.7 billion tones = US$ 13,392m
--> SP should be around US$ 4.78 = A$5.31

In short using an EV with conservative approach:
For the base model (415Mt DSO), SP should be:
A$0.56 (pre-BFS) --> A$2.18 (post BFS/funding) --> A$5.31 (Production)

Note: EV should be around US$1.00/tonne of in-ground resource
Don Lewis CEO briefing 2008:
"The value of recent iron ore transactions in Brazil is also enlightening. The transaction value for itabirite projects in Brazil is approximately US$1.00/tonne of in-ground itabirite resource. Sundances current market capitalisation is equivalent to only US$0.05/tonne of in-ground resource clearly a significant mis-match given that the quality and nature of the Mbarga itabirite is similar to the Brazilian itabirite ores."

CarMichael (SDL Valuation - 2007)
"What is evident from this study is that explorers have an EV of A$1 to A$5 whereas producers generally have an EV of A$6 to A$13. The industry average between explorers and producers in this scenario is A$3.10/tonne.
If we use SDL s non-JORC high grade resources of 218mt @ 60% Fe, we see that the company has an EV of $1.17/tonne, well below the current calculated average of $3.15/tonne."

...unquote.

HB