Thought I might have a crack at valuing the project...most of the assumptions are based around previous company announcements and some old notes from 2007. This is a basic DCF based on my own opinion and comes with all the usual disclaimers about subjective assumptions, not constituting financial advice, and doing your own research...
Happy Hunting,
Xavier
*** Modelled project value for Four Mile assuming total extraction of 168.1m lbs over the next 25 years:
Note: exploration is assumed to another 7 years or approximately 50m lbs of extraction - using just the existing delineated resource, mining ends in FY2033 and the total project valuation falls to ~$600m.
Present value of total project as at 1/7/15: A$725.0m: Present value of 25% share: A$181.3m Present value of 15% share: A$108.8m
+ AGS share of stockpiled Uranium estimated to 30/06/15:
[Total project cumulative production of 2.593m lb @ US$36, USD/AUD 0.75] Using full 25% share, AGS' share (~648,000lb) value: A$31.1m Using dilution schedule (25% to 15%), AGS' share (~607,000lb) value: A$29.2m
*** Total valuation of AGS interest in project and stockpile: Carried at full 25%: (add A1 and A2) = $212.4m
Carried at stage one dilution to 15%: (add B1 and B2) = $138.0m
***
>Total Uranium production FY2016-FY2040: 168.1m lbs
> Forecast increase in production from 2019 onward is due to a standalone 5m lb/pa plant being built at Four Mile, at a capital cost of $330m incurred over FY2018 and FY2019. With the addition of the standalone plant, assuming Beverley continues operating, total production capacity increases to ~7.5m lb/pa, and a 12.5% reduction in operating cost per pound is assumed (more conservative than ACE's scoping study released April 2011).
> Uranium Price
Constant exchange rate of 0.75 USD/AUD
Base Uranium price of US$45 from 2016, increasing by 2% p.a.
5% reduction for royalties and marketing
5% reduction for tolling and management Applying these, the realised net selling price would be ~A$54.15 in 2016.
> Other Assumptions
Operating costs are inclusive of wellfield relocation
3.0% p.a. cost inflation
Corporate tax levied at a flat rate of 30%
Cashflows discounted at 10%
Valuation includes $330m to build standalone 5m lb/pa plant at Four Mile in FY2019
Model assumes no residual value after FY2040.
> Resource:
The total extraction figure is based on
- 71m lbs 4ME/4MW
- 50m lbs 4MNE
- ~50m lbs exploration upside from Four Mile and Arkaroola tenements
> Per unit economics for FY2016:
A$54.15/lb realised net selling price
A$30.24/lb all-in operating cost
A$11.77/lb cash margin, after tax
AGS Price at posting:
11.0¢ Sentiment: Hold Disclosure: Held