Just found this on the website, this is only a small extract but I am fascinated by the valuation and also by the share buy back or dividend concept. This is an exciting time for all the patient NMT holders. GLTAH
NPV-based valuation: A$0.29ps (A$0.27ps)
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Resources – Lithium
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David Brennan, CFASenior Investment [email protected]+61 (0)2 9024 9142
NMT’s interest in the Mt Marion Project has fallen to 26.9% from 45%, while Ganfeng’s interest has increased to 43.1% from 25%. Mineral Resources’ (ASX: MIN) interest is unchanged at 30%. We believe that Ganfeng’s decision to exercise the option to increase its stake for a higher consideration - relative to the US$19.5m paid in July 2015 for an initial 25% interest - illustrates the robustness of the project, and its strategic importance to China’s second largest lithium producer. The US$27.15m consideration equates to US$1.5m per 1% equity interest and implies a project value (100%) of US$150m (A$211m); this is significantly above our estimated Mt Marion NPV of A$155m.
We note with interest that the announcement states that the NMT board “is finalising its approach with respect to capital management having regards to its future strategic needs and outlook”. We suggest that with A$31m cash in the bank (A$29m net) as at the end of December 2015, and a A$38m (pre- tax) cash injection due shortly, a share buyback or special dividend may be in the offing. We revise up our NPV-derived target price to A$0.29ps (A$0.27ps previously). Risks to our earnings profile and target price include, but are not limited to: lithium oxide and AUD:USD exchange rate volatility, the production start-date at Mt Marion and subsequent ramp-up profile, and project development at the downstream Li Project and Barrambie.
NMT Price at posting:
17.5¢ Sentiment: Buy Disclosure: Held
