Assuming MHM has moved out of the resources sector in the minds...

Assuming MHM has moved out of the resources sector in the minds of most investors, it's interesting to speculate on what its cap would be if it was a pure resource stock like SFR.

A lot of resource stocks are valued at many hundreds of millions of dollars while still being years and sometimes an awful lot of money away from production. That's because of the value of the stuff in the ground, but MHM can be shown to have at least equal value in its tech.

Perhaps there are doubts about the tech, but it has been proven and making money for over a year. Once the first US deal is signed, even if the tech is stolen, they will have two highly profitable plants, first mover status and relationships with major players.

MHM's unique technology is only a month away from earning $8-9m pa, from it's one OZ plant alone. Double or more if NMP contracts are finalised, as expected.

Today's announcement indicates that they are on the verge of an expansion into the U.S worth $30m pa for every 100k of salt slag processed. More than that for NMP. They are sourcing salt cake from all over the country, so it appears that the plant may be very large, 200k pa has been discussed in the research reports, it could even end up larger. In this case on the verge of means, build to start mid this year. So less than 4 months from now. Completion probably this year or early next.


If Moolap was a mine it would be one with extremely low cash costs and an infinite mine life, on the verge of generating from $8.6m to over $20m per year.

Tennessee as a mine would be the equivalent of one which was producing one product, the salt slag, worth $300 per tonne, at the rate of 100k to maybe 300k tonnes per year or more, so $30m to $90m.
It could produce the same number of tonnes of another product, NMP, which is expected to be more valuable, so more than double the salt figures and add them together.
Add it to the OZ plant and it's no exaggeration to state that annual EBIT could easily be over $200m from those two plants alone
Again mine life is possibly infinite, certainly nothing like a 7 or 10 year life that applies to most resource stocks.


The technology has global appeal, given the number of countries where landfilling is banned, meaning expansion is very likely. That's the equivalent of being able to go to any developed country and create your own super long life mine.

Revenue will be contract based, not commodity price dependent.

Low interest loans and government support are being touted as part of the development process. Dilution looks like it will be, as they have always promised, minimal.

Long term revenue, will, once this first US plant is approved, be certain to be in the billions, over time. For the proposed construction start date of mid year, the details of the build and contracts will have to be agreed well before. Once this deal is made our risk rating should be far lower than a resource stock that is at a similar stage of pre-production.

So this expansion is imminent, low cost, highly profitable, much more recession proof than mines, getting de-risked all the time, environmentally friendly and government supported apparently, not least by legislation in many countries.

As a comparison some figures from SFR's development announcement of 4th March are pasted below. I am not bagging SFR at all, it is a great company and I wish I'd gotten on it. Their market cap is over $1b and was before that announcement.

My revenue figures for MHM from the Moolap and Tennessee plants are, at the high end, based on an assumption that the first US plant built will be bigger than previously assumed. Still that assumption is smaller than the combined three US plants the the RB milestone report bases its numbers on. In that case the production levels will be over 500k tonnes pa from OZ plus US.

SPL, is still a very good chance of being added to the money making process at some time and being as profitable or more so than NMP, but it's not proven yet and so not included.

Given where MHM is in the development cycle, I believe that if it were a resource stock, it would be valued at much more than 1/10th of SFR. I think that the upcoming roadshows will draw the same conclusion from some of the investment community.

SFR

Initial scheduled mine life of 7+ years
o C1 cash operating costs of US$0.90-$1.00/lb including gold credits
o Pre-tax operating cash flow of A$330-350M per annum (from FY 2012/2013)
o Plant and infrastructure capital estimate of A$270M
o Pre-production mine development of A$130M