potential value of the silica project to mhm, page-4

Hi InvestotPaul

- looks like they are going to amalgamate with other resources in the area to boost total resource.
- I assumed 70% MHM, 30% other
- yes the Capex being floated around is at $500M
- from here I want the other way and asked what return or payback would the new company want on its capex. Probably a high of ten years to a low of five years. For arguments sake lets say seven.
- we then end up with an EBITDA of $500m/7 = $70M
- say half debt funded - therefore interest cost = $20M
- Net profit before tax = $50M
- Depreciation on $500M would be $25-40M so negligible tax (say) $10M
- Therefore NPBT = $40M. PE ratio of 12 = $480M market cap.
- Agree that the company holding the resource would be 20-25% and then take 70% of that = 15%. I have major at 40% and IPO at 45%. To attract investors and taking into account 2-3 year build forward PE say at 8 therefore new company floated at $320M - IPO raises 45% = $144M + $128M from major shareholder (40%) = $272M which is roughly half the value of the required capex which agrees to my earlier assumption.

So a mc of $320M of which MHM shareholders receive 15% = $48M = about 35c/share.

Now probably more by good luck than good measure but basically get about the same as you Investorpaul but by using another method,

Spozzie