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Ann: Clean TeQ Sunrise Definitive Feasibility Study completed, page-242

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DrowningNotWaving

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27/06/18

11:34

Post #: 33977016
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Originally posted by blackeyed ↑

Sally
I have gone off and done my due diligence again and I am with you. After discussions with informed persons the decisions Clean Teq has made are logical and in the best interest of shareholders. There is absolutely no need to panic or be concerned.

The capex was enlarged to enable a significant increase in maximum output- you will note the average EBIT is considerably less than that which will be achieved at max output. At max output EBIT will be closer to 600m US than 300 in otherwords it almost doubles. This is tremendous upside.

Moreover the are now constructing a Scandium refining module with a capacity of 80tpa, which they can quickly increase to 160tpa. Now I was informed that although the DFS estimates on 10 tons per annum sold they are going to mine and process 80tpa so they can stockpile on site and point to customers of a ready supply for a number of years. This makes absolute sense and is even more upside.

Then there is the mine technology Friedlands principle interest is in licensing and widely disseminating the mine technology he believes it is a mining game changer and the value of that will be greater than all the revenue from the minerals streams.

I was also informed that the reason they did not nail down more off-take agreements is that they will be looking for an equity partner who will take their share in product less costs. They have any number of options in this area and with prices where they are and supply uncertainty a premium and hence a lower than normal equity share for the financial contribution is a distinct possibility.

The share of debt and equity requires the dfs to finalise. The equity proportion of the partner is required to finalise the off-takes. The equity share partner for product is now the total focus.

Now on the numbers published the EBIT can be easily converted to EPS by deducting interest at 10% for the loan component and the depreciation on the premise the equity partner pays their share of the depreciation. Mining projects on average depreciate at 6.67% of the capital. Now the capex includes a number of once off items like constructors margin etc which don't form part of the depreciable component.

So working back from and assumed equity share on the basis of 55% debt and 45% equity, and no premium for the equity, taking existing shareholders equity into account the equity partners share is a little over 30%.

On this basis the EPS on the average EBIT for existing shareholders is 23cents a share. The average 12x multiplier produces a share price of 2.70. If you increase Scandium to 25tons a year and cobalt prices go to $100,000 a ton EPS increases by 12cents a share to over $4.

So I don't care what the current hysteria is all about I have done my due diligence and are very very satisfied. The other numbers published here are nonsense. There is no tax for several years because of development write-offs. The financing is not an issue. The capex was the big risk and thats behind us. Just let the announcements role and wait.

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Blackeyed,

I did a back of the envelope similar to yours (main exception being I depreciated over the 25 year mine life) but came to similar conclusions. I got a very loosey goosey dividend number in the 12c to 16 c range by the time they get to production (approx 50% payout ratio) plus a 4 to 5 bag result (I have an average price around 70 c) on the capital appreciation side over 4 to 5 years which is a very good result IMHO.

Set and forget for me.

I suspect that the main differences in opinion on the prospects and thus share price revolve around short termers/traders vs longer termers with a very different time horizon.

my 2 cents, YMMV and DYOR

Last edited by DrowningNotWaving: 27/06/18

CLQ Price at posting: 76.5¢ Sentiment: Buy Disclosure: Held
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