1 Cent Party, page-38

In my last post I mentioned there was a slight "apples to oranges" issue with the analysis which attempted to estimate the Enterprise Value of Kogi Iron's Agbaja project using forecast NPV8. The problem arose because EBITDA (pre-tax) was used to create the NPV8 for FMG, Champion Iron, Grange Resources and Mt Gibson Iron whereas net cash flow (after tax) was used for the Agbaja project. The problem has been addressed by grossing up the Agbaja numbers by (1 - tax rate). This will probably over state the Agbaja numbers but for the purpose of this simple analysis it doesn't matter.

The following table shows the potential EV attributed to the Agbaja project using market-derived percentages of NPV8:

	EV / NPV8	ASX examples	Potential Agbaja EV
1	15%	Grange, My Gibson	US$159m
2	20%		US$211m
3	25%		US$264m
4	30%	Champion	US$317m
5	35%	FMG	US$370m

I will leave investors to decide which ratio is relevant.but if, for example, investors think the Agbaja project is equal to FMG's operations, then its potential value is equivalent to 35% of its NPV8, ie US$370m. This potential future value must be compared to the US$507m of capex required to complete development and bring the project into production and so deliver the numbers which translate into the NPV8 figure.

Again, I make no claim that my analysis is correct. Anyone contemplating investing in Kogi Iron should undertake their own research and analysis.