Thanks for that @binwood A couple of small differences in our...

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growler1969

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24/11/16

17:17

Post #: 20866475
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Originally posted by binwood ↑

Hi Growler,

Some rough numbers from me, haven't had enough coffee for anything else yet.

Let's say spod is going for US$750 a tonne and fx is 0.75 (both relatively realistic and makes the numbers a little neater) translates to AUD$1,000/tonne.

DFS has our cost of production at $316 FOB. A few comments on this, PLS are quoting CIF, I am not sure what we will be agreeing with our offtakers, if we are selling from port here or paying ocean freight. Let's assume we pay ocean freight and the first year has the odd curveballs.

We will call COP AUD$400/tonne. Gives us profit margins of $600/tonne.

219kt production profile gives us revenue of $131m.

I am going to say $20m a year for non sustaining costs not capture in COP. That brings us to $111m.

Interest on a 65m loan at say 8% is 5.2m in interest costs.

Assume depreciation on a straight line basis of 10 years (so $13m a year). This gives us a taxable income of $92m. So call tax a round $27.5m (IF they pay full tax).

So we have $131m - $20 (non sustaining costs) - $5.2m (interest) - $27.5m (tax) = $78.3m FCF

I would suggest that 16x P/E is probably too high for a mining company but in boom times it is certainly possible - you do have to remember though that AJM's confirmed resource is only 13 years.

So I would prefer to use that as the max multiple.

13x 78.3m = 1,018m.

SOI is approx 1.53bn I think. So that gives me a share price of c.67c. "Only" a 4 bagger from 16.5 Growler, still close to a 5 bagger from here though.

And plenty of things to push that higher, downstream processing for e.g, paying out debt adds $50m to valuation as no interest charges, spodumene prices pushing up...and the list goes on.

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Thanks for that @binwood

A couple of small differences in our calcs. I take on board your points re: P/E and LOM and CIF v. FOB. Great attention to details.

As such, your projections are more conservative than mine. Which is not a bad thing. And I still suggest AJM is a screaming BUY at your more conservative SP projections.

All good.

AJM Price at posting: 14.0¢ Sentiment: Buy Disclosure: Held
9 Upvote

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