early overseas trades at 16 - 17 cps, page-11

Hi everyone. So Ive had a think about this company and tried to make some guesses about what production may mean for the bottom line. I noted the recent announcement that they are getting their ore processed by Denison Mines. So what I dont know is what the toll treatment costs will be/what margin WCU can expect. I think those that simply multiply 200,000 pounds by $58 are in for a shock. Denison Mines is not a profitable operation from my limited research into them. I was trying to determine a cost of production from their quarterly reports but it isnt disclosed. If anyone knows please advise.

Anyway lets guess that margin is 50% of sale value. That means WCU could expect in the order of 200,000 x $29 = $5.8 million. Now WCU borrowed $2.5 million to get the material for processing and the loan is convertable which either dilutes shareholder value or they could pay it back I guess - 31 December 2010 being the D day for that loan so would guess its a conversion at 10.75c?? - so taking account of that $2.5 million to get the material to Denison (and the effect of reduced shareholder value) that leaves $3.3 million to work with. Now their cost of production Sept Quarter 2010 was $1.3 million, and the annual report for 2009/10 says mine development costs were $2.6 million. Interestingly the ore inventory value in the annual report "at cost" (refering to note 10) is $4.4 million.

So guess we know what the cost of that ore is considered by the company. So working with that cost (and ignoring the september quarter production cost) $3.3 million - $4.4 million = -$1.1 million. Awesome result!

The company has a three year agreement for 55,000 tonnes of production per annum, with the current effort comprising 45,000 tonnes. Doesnt leave much more for next year. I just cant see how they are actually making money out of this arrangement and it doesn't seem like they even have that much ore to play with - indicated at 1.1 million pounds all up if that is correct??.

Of course the key here is their toll treatment arrangement and what margin after production cost they receive and also price that they realise when selling uranium. Guess this will become clearer soon enough. If anyone can shine some certainty/ or point me to where the information is to clarify these assumptions I would appreciate it.

Is the company worth $29 million, umm???? My view is sell unless they actually prove they are making money out of this toll treatment effort (after costs, loans etc are considered).