Dingo West with 1mtpa PCI coal can generate cash flows of around $50mill on current share capital of 550mill shares which equates to an EPS of 9cents per each share. The current coking coal prices range between $220-$250. Dingo West production cost incl royalty is approx $100/tonne. So at a price of say $200 theyll make a margin of $100/tonne or 100mill in profit! Tax at 50% leaves $50mill whicj equates to EPS of 9cps. Give a PE of 10 and you have 90cents per share value.
* SO pretty much even if they dont go ahead with gallille or even Springsure creek , this coy is worth about a dollar!
Obviously theyll go ahead with Springsure Creek since they have port allocation and investment in WICET .
Springsure Creek they can either get a JV partner or go it alone - theyll require abt 1bill capex; they can go for a debt/equity mix. Borrow 500mill, and raise 500mill when markets get better or once dingos up and running the share price should be well higher. Theyll be able to borrow the funds since dingo west provides cash flows of 50mill a year on 1mtpa pci coal production which on reserves can be possibly expanded to more than 1mtpa.
Lets say they issue another 500mill shares at 1.20 to raise 600mill. This would mean the new issued share capital would be approx 1.2billion shares+options.
Now theyll produce 11mtpa which will eventually be expanded over the years
thermal coal price assume will be long term $120; Cost of prod $65/tonne incl royalties. AUD say at parity. So $55/tonne margin * 11mtpa = 605mill in profit; Divide by 2 for 50% resource rent tax = $302.5mill. Less depreciation of 15mill and borrowing costs of 35mill = approx 250mill
Add to this Dingo West profit of 40mill (50mill less depreciation etc) = 290mill total profit
290/1200= EPS of 24.2 cents per share
Coal stocks that are in production all trade at PEs well above 10 times earnings
Due to this being quite a large project involving thermal AND PCI coking coal say PE 12 minimum: $0.242 EPS multiplied by multpile of 12 = $2.90 value
Theres going to be 'ongoing capex' from what i gather to develop the 2 long walls, but in the raising i assumed we raised an extra 100mill for working capital, PLUS, once the share price gets higher to reflect the project value, or once production is in place, they can do little cap raisings for working capital purposes which wldnt really materially affect the share capital figure too much
Again this all all ASSUMING they develop it all alone with a JV partner; Obviously the borrowing of 500mill would entail a substantial interest bill to be repaid.
Yes Gallillee missed out on port allocation, but theres not even a rail transport solution and even if we got port allocation, it wouldnt be till 2018 or so b4 the project would get off the ground!
As you can see , Springsure Creek development is a big task on its own requiring 750mill development capex plus another $1bill in ongoing working capital over time 4 the two long walls once in production (from what ive understood)
Gallillee requires 4billion plus in capex! Even with a JV partner thats over 2billion dollars BND would have to cough up . That would dilute the share capital waaaaay too much, even with the jv with amci. How would BND come up with over 2billion dollars?? Wed be DILUTED like crazy. Not worth it.
BND Price at posting:
57.5¢ Sentiment: LT Buy Disclosure: Not Held
