It's easy to say a particular price level is going to be...

It's easy to say a particular price level is going to be achieved or is just a fantasy, but it would be nice to get each of you to provide some analysis for your position.

Let's look at a basic valuation method, a PE ratio. A PE ratio is the current market price divided by the company earnings (earnings in this context mean profit and I'll use statutory net profit). Obviously, TIG is not yet profitable so we need to look at a future date and forecast profitability to reach a conclusion on value. In late February 2021, the annual report should be released and I think almost everyone reading this thinks TIG will make a net profit for the year due to several factors. In late October and January, there will also be quarterly updates that will tell us about the washed coal situation, sales volume in tonnes, and a market price for what has been sold.

The average PE ratio for mining companies on the ASX is 20-25 (greater than the ASX average of 16 because mining is higher than average risk option).

So for TIG to be worth $0.10 we would conservatively expect earning per share to be $0.005 (0.1/20). There are currently about 13,066,250,000 shares on issue (Market cap of 209.6 Million / share price $0.016). So a share price of $0.10 should equate to a net profit of approximately $65,331,250 AUD. A share price of $0.03 is 30% of that and should equate to a net profit of $19,599,375 AUD.

So that leaves us with the question what do we think TIG's net profit will actually be?

A few necessary assumptions from TIG historical performance and macro trends:
-If operating costs are the same as last year they's be about $12 million AUD
-USD/AUD exchange rate is $1.40 (just picking a round figure that's approximate to current)
-Cost of goods sold is approximately $50 USD per tonne ($70 AUD)
*See page 34 of the TIG 2020 annual report for the comprehensive income statement for guidance on last years peformance but note exchange rates have changed and sales occur in USD terms

I'll two a conservative and aggressive analysis but I'll assume no washed coal in either because it is too unpredictable until we get an announcement saying the wash plant is fully operational.

CONSERVATIVE ANALYSIS:
In the conservative assumption, let's say TIG sells a volume of thermal coal that is subpar to 5,500 NAR standards and trades at a discount o the market price in China. In this case, we can assume an average sales price for the year of $75 USD ($105 AUD) which is what the lower energy grade Indonesian coal is selling for now. Let's also assume it sells the low end of its annual sales guidance: 750,000 tonnes.

Revenue $78.75 Million
COGS $52.5 Million
Gross Profit $26.25 Million
Net Profit $14.25 Million

The share price should be $0.022.

AGGRESSIVE ANALYSIS

In the aggressive assumption let's assume all the coal is at the 5500 NAR standard and the average price is the Russian market price listed in the Q2 2021 report, $107 USD ($150 AUD). Let's also assume that the loading rate of improvement of Q2 (~ 25%) is carried through the entire shipping season and there is sufficient stock to match this. This would mean a sales volume of approximately 1,000,000 tonnes.

Revenue $150 Million AUD
COGS $70 Million AUD
Gross Profit $80 Million AUD
Net Profit $68 Million AUD

The share price should be $0.104.

All of this is a relatively simplistic analysis and it relies on the stock being known and the information being broadly available so the pricing is efficient but it is quite possible the share price could hit 10 cents in 2022 if everything goes right. Obviously washed coal is a game-changer but we don't know for sure if there will be washed coal sales this year.

Let me know what you think.

OBVIOUSLY, THIS IS NOT FINANCIAL ADVICE. DO YOUR OWN RESEARCH, I'M JUST JUSTIFYING THE TWO POSITIONS PUT FORWARD IN THE POST WITH SOME ANALYSIS