australian article, page-38

Hi (Pythagerous),

Based on your calculation approaches, using FOB, Productions Costs and Operating Margin, I came up with the following valuation of SDL's high grade ore (+60Fe)

The valuation is based upon the following assumptions:

1. For High Grade Hematite - DSO (+60Fe):
- 500MT
- FOB = $62.20/t x 500MT = $31,100,000,000
- Production Costs = US$19.65/t x 500MT = $9,825,000
- Operating Margin = $31,090,175,000
- Capex = $3.3b

--> Profit = $28b

2. For Low Grade Itabirite (+38Fe) to be converted to +65Fe concentrate:
- 5 Billion tonnes (+38Fe) -> 2 Billions tonnes of High Grade (+65Fe concentrate)
- FOB = $62.20/t x 2,000MT = $124,400,000,000
- Production Costs = US$31/t x 2,000MT = $62,000,000,000
- Operating Margin = $62,400,000,000
- Capex = $1b

--> Profit = $61b

Note: Production Costs are from Westcott, and it's a reasonable estimates as it's an additional US$10/t over the DSO due to the beneficiation required to generate the concentrate).
- Phase 2 Itabirite Capex to be funded from cashflow (Source SDL's AGM 2009 - Nov 2009)

Total profit for SDL's high grade ore (+60Fe) = $89 Billion

Now wost case even with 6 Billion shares on issues and participation of Gov is 25%, and we take out 20% of Taxes,etc...., we are still well above US$7 (or A$5.5), and we are not counting on the following upsides:
1. Estimates of 500MT of DSO and 5Billions tonnes of Itabirite are very conservative.
2. Land have been under-explored + portfolio growing with more potential tenements acquisitions (Les Mamelles, tenements close to Nkout,etc..)
3. Extra revenues from Rail and Iron port terminal as potential JV partner with other Explorers (Iron Ore region growing)


Happy to have all your feedbacks.

Cheers - BS