So many analysts have taken a shot at GGGs evaluation over recent years.
But it seems to pend around the obtaining the mining license approval in the end.
The valuations Ive seen range from $.50 cents, $1.20 (recent), $1.80, $3.20 and even $6.35.
These are over the past 7 years at which time U08 and Rare Earth prices were much more than todays prices and hence why so much higher than the evaluation you guys are getting at $1 (given the license was granted.)
However, given time and U08 return to any worth which seems to be given the case given the expected demand over the next 20 years (Ive read a few analysts are confident on consumption growth of 6%pa).
Coupled with the rare earth performance as we know and being gggs mainstay and no analyst is downgrading rare earth consumption forecasts. Id be interested to hear thoughts on why in 5-15 years and a commodity return to favour, why these lofty prices are not again attainable. If they were...omg what a profit....15 cents to $3-8 is a dream for me and if its a 50/50 chance. No matter the wait. Ill wait.
I did read a brokers evaluation of 23 cents in recent times around a month ago and that of course was with the license unapproved.
The Rare Earth component of this resource is 2 1/2 times the current worlds biggest deposit outside of China. If you average its top 10 closest rivals. Its 7 times their average and its decency is and cost to mine and extract is looking good as well given the Chinese partner.
http://www.rmresearch.com.au/wp-content/uploads/RMResearch-GGG-20120924.pdf
http://investingnews.com/tag/asx-ggg/
I havent even looked into the U308 side. Thats just a massive double bonus. But as we know its the worlds third biggest deposit and I havent found an analyst yet who doesnt feel the U308 price isnt about to head up. Lets say it returns to a miserly $42/lb. Which its looking set to do easily within a few years ahead from what Ive read.
Take a look at the analysis below my text and tell me that doesnt make your head spin a little if accurate. All the Rare Earth prices are listed and such prices would need to marginally return given an increment in resource since but countered by share issuing. The evaluation came through at $3.95 per share.Its from fellow HotCopper investors some years ago. Id be interested to hear your thoughts on this as well.
So whats really holding it all back? The license.
From all my readings its approval looks far more probable than improbable.
The government supports it.
The main Environmental Authority involved with analyzing the credibility of the Environmental Impact Assessment supports it. (U08 side)
All thats left is the local community.
A community that is depressed and desolate and desperate for jobs and money. So bad that 6 out of 30 graduates killed themselves last year as it for them is that miserable. All they obviously need is to hear is the filtering through that the mining will not negatively impact their environment, as recently supported by their governments assessment, and what would plausibly happen to the opinions of the ever dwindling proportion of the population that objects? Im happy to "gamble" on this. With proper support and assurance. Theyd care for each other and their town as much as their environment and my guess would be people would continue to trend towards a "yes" with all this info where it seems to be a 50/50 split right now.
So with such massive upside and logic behind the situation.... Im taking the risk.
I know theres probably loop holes here among all this that you could pick. But at the end of the day its the overall storey and probability of outcome that matters here as to where it goes and we all agree that if this is approved. You better hang on to your hat.
.
So theres a lot of guess work in here sure I understand.
But what I do know for certain though . Is Shenge Resources Holding are not foolish players. They arent the worlds leading rare earth company from making bad decisions. They are very astute. They have never stepped foot out of China to do this before and this resource to them obviously has the most potential they can find globally. That speaks for itself and Im pretty happy to get in too if their analytical team have jumped in as big as what they have.
Who knows. Maybe this could fizzle and you lose half your money. But maybe it could boom to a pretty majestic level and how much would you be then set to gain in comparison to that loss?
I know I could do with a Ferrari! (jokes....I think??)
Realty
Apr 2013
Preempt,
I took things a little further in evaluating the expected revenue stream from the proposed production numbers put out on GGG's Company Presentation. GGG had proposed production numbers based on 7.2 mtpa of REEs. Please see the breakdown on page 15. If you take today's REE prices and convert all of the production numbers from 7.2 mtpa to 3.0 mtpa and multiply it out you get this:
$608,064,000 REE revenue per year or $101.34 per kg of REE
$46,475,000 Uranium revenue per year
$10,382,400 Zinc revenue per year
For a total of:
$664,921,400 Total Revenue per year
$38,400,000 Costs for production ($6.40 per kg of REE)
Total Revenue would equal:
$626,521,400 per year minus taxes and royalties, based on 3 mtpa treated and concentrated ground
You can more than double that number if you move to 6 mtpa.
So lets use your numbers on tax and royalties:
$626,521,400 - 37% tax and royalties = $394,708,482
$394,708,482 X PE of 10 = $3,947,084,820. Divided by say 1 billion shares = $3.95/share
Think about that....that is at today's prices and probably our worst case scenario.
$3.95 divided by .30 cents = 13.2 times what the stock is worth today. I would gladly take 13.2 times my money invested in a worst case scenario. Imagine if the prices increase 25% as GGG is predicting. Then you are looking at at 16.5 times your money. Lets take one step further and increase production to 6 mtpa and you double that number to 26 times your money invested today. I will gladly take 26 times my 30k investment. Remember these are at today's prices!
Prices:
Zinc = .84 cents/lb
Uranium = $42.25/lb
Dysprosium = $615/kg
Terbium = $1,250/kg
Europium = $1,550/kg
Yttrium = $36/kg
Neudymium = $73/kg
Prasedymium = $83/kg
Something to keep in mind is that GGG is predicting higher prices than today, but when you discount the predicted prices at 60%, as GGG has done, you end up with a price below todays prices and that is why you are coming up with the numbers that you are. In my opinion, I would prefer to use today's prices and value the company's assets as it is today and then make my projections. I predict prices for Uranium and REE's will go up over the next three years. So the picture looks rosy to me.
From the numbers it appears that a payback period of three years is reasonable. GGG has also alotted like $400 million to build a refinery facility somewhere in another country, but what if they use a third party to complete this in "their facilities"? That $400 million startup costs goes away. Sure our unit per/kg cost goes up, but we would still be one of the lowest cost producers in the world.
My last GGG value was based off of Preempts formula for to attain value.
If you take the revenue stream of $394,708,482; a payout period or mine life of 159 years; and a cap rate of 10% you attain a value for GGG of:
3.947 Billion in US $
This is all based on today's REE, uranium and zinc prices and on a 3 mtpa mine output.
Amazing. Oddly enough, both of our formulas came up with a value of $3.95 a share based on the issuance of 1 million shares and some dilution.
