time to sell?, page-22

Great post Slats7, comparing SDL with FMG

SDL: 10 year DSO mine life @ 35mtpa
SDL: 15 (to 20) year Itabirite mine life @ 35mtpa

FMG: 50 year mine life at 355mtpa

FMG have double the mine life and 10 times the potential production capacity

so FMG should be valued at 20 times the price of SDL

but FMG market cap is 11 times that of SDL

FMG has a market cap of $17 billion

SDL has market cap of $1.5 billion

total SDL CAPEX will be $8 billion

at (generous) long term iron ore price of $110/t ($175 per dmtu), project has an 6 year payback

at current $167/t or $270/t dmtu, project has a 3 year payback

with Hanlong offering $1.5b for SDL and then having to incur $8 billion in capital costs, their capital payback period on long term price assumptions becomes 7 years for a 25 year project

if Hanlong offer $1.00 per share, their capital payback period on long term assumptions becomes 8 years for a 25 year project


if Hanlong offer $1.50 per share, their capital payback period on long term assumptions becomes 9 years for a 25 year project

but then, long term iron ore at $95/t ($150/dmtu) is not impossible

this blows out the capital payback periods to at 50 cent, $1 and $1.50 takeover to 9.5, 11 and 12.5 years

now your dreams are starting to sound expensive

good luck