Value Thoughts Shareholders have by now digested the PFS and...

Value Thoughts

Shareholders have by now digested the PFS and their thoughts around future possibilities for RH. It is time to get some of my thoughts on paper for discussion and feedback.

RH shares in issue (SOI) are almost 200m.

PFS NPV $523m $2.62 per share

PFS NPV post tax $365m $1.82 psh

PFS NPV at spot $1,815m ~$9 psh

PFS NPV spot ptax. $1,272m ~$6.36 psh

The PFS NPV didn’t include up slide for 3 deposits yet because be included and possibly other extension of IO resources. I am see the NPV is a base case until the full resource is available.

The PFS was solely focused on a Port Hedland solution but shareholders know that a “blue sky” opportunity may become available if the Leichhardt (Cape Preston East Port) opportunity becomes available in 2028 or 2029. The opportunity could well add a least 25% to the NPVs above should that take place. The much shorter haulage distance could be highly desirable to RH and the port usage could help underpin Leichhardt’s port and project. The same number of road trains for the Port Hedland project could deliver about 8mtpa to CPEP!

I will leave it to individuals to evaluate likely upsides to NPV.

Project sale discussion.

We know that RH’s C1 cost will be around US$51/t. Two nearby IO neighbours are FMG and RIO. Both have C1 cost below US $20/t. If either were to take over the project the margin 51-20 = $31 will got to them. If they were to ship 150mt ore that is a US$4.65 billion (or A$ 7 billion)! And the project is ready to go!

What you see the sale price? What it be the price that TIO and OCJ might accept? That is the billion dollar question? I have long held the view that the minimum would be $1 billion. That about $5/sh. It could be more or a deal that includes royalties.

If any TO deal were to be made it is not unreasonable to expect it to occur prior to contracts of road haulage operations.

Notice that I have not mentioned any possibility of a TO by TIO/Todd. I know that some think it the most likely possibility.

Really interesting things to watch out for in the next 12 months are two items that will realise returns above the currently proposed project. They are any signs of take over activity and/or the Leichhardt FID.

Do not take my thoughts as financial advice and my thoughts and assumptions will be wrong. Do your own research. I am not a financial advisor. Any comments welcome.