As a back of the napkin attempt at a valuation, taking the...

As a back of the napkin attempt at a valuation, taking the numbers from MGX's March 20th presentation for cash cost and volumes shipped, and these assumptions:

US$100 average 62% IO price in year 1, falling to 80, 70, 60, 60, 60 in future years.
10% High grade premium steady.
0.69 AUD/USD this year falling one cent next year, then climbing one cent each year.
10%pa discount for time value of money.

I arrive at total LOM cashflow of $1.43bn, and a total company value of about the same, once the discount is applied to future earnings, and the cash at the bank is added back in. That gets you to $1.25 per share.

Of course, twiddle those numbers a bit in any direction, and it moves a great deal. Am I too pessimistic on future ore prices, or not pessimistic enough? Certainly, my year 1 IO price figure is conservative given today's prices. I make no pretensions to be able to forecast the IO price: these are close to complete guesses. Someone with better insight here may wish to tweak my numbers?

To illustrate the point about the volatility of the IO price, if it were steady at today's price for the full 5-and-a-bit years, my valuation rises from $1.25 to $2.24.

Even if this year were the only exceptional year, with 62% IO @ $100 on average, and future years were all at $60, I still get to $1.13.

One point of note is that MGX historically under-promises and over-delivers on its operating cost estimates. There is also value to be unlocked in the rail rebate asset, the mid-west low grade stockpile, treasury returns, and the possibility for MGX to make an intelligent acquisition or simply to enlarge the main pit (or tackle those satellite deposits) and continue its cash generation beyond 5 years. There is definitely some upside potential.

Going the other way, I've not made any deductions for tax (uh, yeah), the iron ore price could collapse, so could the sea wall, the AUD could rise, Trump could [insert ridiculous action of your choice]...

But I'd suggest the figures above are sufficiently conservative to underpin that $1.25-ish price. Things would have to get quite a lot worse in future years for MGX to be worth much less than that. A quarter of the company's value is still cash, and it's growing every day.

Other than for a bit of rebalancing, I'd be disinclined to sell this at present.