valuation

Hi

I am trying to work out if its a good time to buy into Iron Road.

The key question i have is, is the expected resource increase factored into the current share price? I try to answer this by comparing the numbers to that of another company, FerrAus.

I think they are similar because of resource size, both need to build infrastructure and both are in the sights of the chinese (i say this because a chinese company bought the land next door to Iron Road so a take over must be in consideration). I also note, FerrAus received a take over notice from the chinese last year and their SP spiked about 25% on that news. The take over still values the company at 30% higher than todays share price.

FerAuss:
- MC 230m
- SP 1.045
- shares on offer 205m (needs to be checked)
- jorc 328mt
- jorc grade approx +55%
- waste to ore ratio 3:1 ie 33% of each mt of soil is iron ore
- capital required 960m
- cash on hand 22m
- chinese takover suggests fair value of 1.29 and shares rose 28% on takeover news
- EV of prod in ground (232,000,000 - 22,000,000) / (360,000,000 x .33) = 1.77
- so each mt of fe in the ground is worth 177c

IronRoad:
- MC 109m
- SP .945c
- shares on offer 109m (needs to be checked)
- jorc 500mt
- 17% of every mt of soil is iron ore
- jorc grade estimated 70% (estimate)
- capital required tba
- cash on hand
- no take over but chinese company bought neighboring land
- EV of prod in ground A (109,000,000 - 3,400,000) / (350,000,000 x .17) = 177c
- EV of prod in ground B (109,000,000 - 3,400,000) / (800,000,000 x .17) = 78c
- EV of prod in ground C (109,000,000 - 3,400,000) / (1,100,000,000 x .17) =56c

In summary, when compared to FerrAus the resource has the same value based on todays resource volume, ie 177c. This suggests me that the current share price has not factored in the expected resource increase and the share price should move up on the news.

Can anyone see any issues with my logic here? Does anyone agree or totally disagree?

I also note that 17 - 19% ore is low but im not sure what the average is. Can anyone tell me?

Notes:
- i interpret FerrAus' comments of 'waste to ore ratio as being the % of ore per mt of soil. this might be wrong. checking...
- need to check shares on offer for both again
- only compared to one company which might be misleading.