ADN Poochera - Potential Cashflow/Revenue Streams, page-64

Correcting my analysis posted earlier.

• I didn't correctly account for the ADN 75% share of the project. I have increased production from 8,000 tonnes HPA to 12,000 tonnes HPA to compensate which I think ADN under JV could comfortably produce and the market could comfortably absorb.
• Corrected dry-processed CAPEX to more representative AUD $10M ( although we wait for the scoping study to confirm the final number). This improves the cashflow estimate for dry processing.
• Corrected tax calculation.

Key point is though. There are some scenarios that could comfortably get ADN to over $1 per share due to the grade, size and purity of their resource and due to the marketing / development discussions that have already been having.

Certainly the potential to get to a $745M to $1.75B dollar company. See analysis below which equates to a share price range of $0.36 to $0.84 ( highly speculative ).

DYOR. Not advice. The information below is based on my own analysis and reasoning.
It is highly speculative. Treat the below as a general perspective only to help understand potential.​

It seems quite clear from letters of intent received to date and the site visit that production and sales of 500 kt of dry-processed ore is feasible. IMO this alone could deliver cash flows of around AUD $50M ( subject to margins, and we wait for this to be confirmed in the scoping study ).

For a dry-processed scenario below I have used 500kt of sales at a margin of AUD $150 per tonne.

The company has already foreshadowed collaboration for production of HPA in China. This was covered in the following announcement:

https://www.asx.com.au/asxpdf/20190528/pdf/445f0rb6ly8l5f.pdf




So how might a JV look?

1. ADN have the resource size and grade to comfortably produce 12,000 tonnes of 4N HPA (but they could easily produce much more).
2. A JV would mean a CAPEX sharing arrangement. Test work has shown that ADN can produce a premium HPA feedstock that should significantly lower CAPEX and OPEX ( https://www.asx.com.au/asxpdf/20190204/pdf/442bt627cf8r2m.pdf ).
3. For the purpose of this scenario I will assume the project gets a 50% share of EBITDA from HPA production ( and ADN would subsequently get a 75% share of this because of the JV with MEP ).
4. I have used a price of USD $28,000 per tonne.
5. I have used a cash cost of USD $8,000 per tonne (however for reason above it is expected ADN could improve on this ).
6. I assumed AUD $150M CAPEX ( which wouldn't come into play until they embark on a HPA JV ) and 10% interest on debt to cover the CAPEX. Very important to note that by this point they would be generating cashflow from dry-processing of around AUD $40M under my scenarios.

I have assumed 25% additional dilution by the time we get to HPA production. But it may actually be much less than this given there's good potential ADN can get to cashflow from dry processing with low or very little dilution.

Here are the scenario results:

1. For dry processed @ 500kt pa ... a share price of $0.36 ( based on margin AUD $150 / tonne )
2. Adding in a JV for 12,000 tonnes of HPA ... a share price of $0.85 ( see assumptions above )

The scenario takes ADN from cashflows of around AUD $37M to over AUD $110M and I think they could do this within 3-5 years.

All IMO and highly speculative ...

One last thing ... this excludes revenues from wet-processed products ...

P/E figure of 20.0 has been used but because of the range of possible revenue streams I think this is conservative. See the opening post ... https://hotcopper.com.au/posts/39746659/single

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