As I have posted previously regarding updated pricing of NdPr oxide using freely available metals pricing at
https://www.metal.com/Rare-Earth-Oxides/201102250162Last available Jan 28th
955,000 RMB (Yuan)per tonne / 1000kg X 0.15725 (currency conversion) X 0.885 (ex13%VATprice) = $132.90 USD/kg
As I have stated previously this oxide is becoming overpriced in the short-term, the economics of a deposit and in particular downstream processing have to stack up with a long-term NdPr pricing of USD $80-100/kg. Gav & Pete's DFS MarkII (May 2020) are using a longer term price of USD$87 to determine an EBITDA of USD 257mil. Typically these types of miners/processors with 30+yr life will trade on a PE multiple of 10 BUT a multiple of Free Cashflow (NPAT+DA) not EBITDA. For calculation purposes lets accept that ARU will pay tax (30%) ie ignore the "benefit" of accumulated losses. I will also assume worse case scenario of interest expense being at the highest end of 12%pa (if anyone is in the resource-financing industry and disagrees with this figure, please let me know - gently) so USD768 X 0.12 = USD 92mil pa. Assumption that Dep&Amort is over a 10year period ie US$77mil pa. Repayment of loans also over 10yrs ie USD 77mil pa
My calcs look like this: (USD$)
257mil - 92 (interest) - 77 (repayments) + 77 (D&A) = $165 mil x 0.7 (30% comp tax) = $USD 115.5mil pa X PE 10 = NPV/Capitsn USD 1.155 bil
/ 0.712 (USD/A exch rate) = $A 1.62 bil, so one can see when I have said that ARU will have a ceiling of $1.00 per share on present metrics. (1.550 bil SOI) and this is assuming financiers/funders DO NOT take up the options of converting debt to equity at any stage (unlikely).
My gut feel on this one is that ARU will be a sell/take profit at 50-60c ($A800-900mil MCap) if they reach it within the next 12-18 months. Then re-assess how they are proceeding with construction/commissioning/production and delivery (and if NdPr prices hold up in 2024/5) for a re-entry if all "going to plan" back at under 50c. The bigger dollars will be made if and only if, this resource proves to be much much larger than currently documented, and thus able to provide 10%+ of world NdPr demand over a longer time frame of 50-60yrs. This probably won't be known until 2030+
For anyone thinking NdPr pricing is going to the moon and staying there ie over $US180/kg, the economics of using it in PMs starts to significantly deteriorate at this point, and humans being what they are in seeing an $$ opportunity, will invent/devise a way to either use less of the material to make things work OR find a complete alternative !! which would be no good for ARU
Happy investing.
BBB
(20min delay)