The current Richards Bay export prices are below.
API-4 is the 6,000kcal index, so current export price out of SA is US$324/t. I had a quick look, but could not find their exact product specification to confirm pricing.
The export agreement is for a minimum of 20kT per month, so 60kt per quarter. Costs to produce last quarter were US$9M (US$74/ROM t, from memory better than previous quarters).
Assuming MCM get 85% of API-4 price, the below is some quick workings.
Export API-4 Sales - 60kT @ US$270/t
Domestic API-4 Sales - 20kT @ US$90/t
Middlings - 6kT @ US$40/t
Total revenue - US$18.2M
Total costs - US$9M
Potential Profit - US$9.2M (per quarter)
They have US$16M of debt and some convertible notes I think. But could deleverage quickly.
The Makhado BFS has NPV of A$215M (base case), I would expect MCM to be valued at 50% of NPV once funding in place, 15-30% for no funding - so I value this part of the business at A$60M.
The existing thermal operating that could potentially produce US$36M profits per annum, A$53M - surely should be valued around A$100M in the current environment.
So I’m thinking a share price target of 80c to get to the A$160M market cap… be interesting to see what family funding gets announced for Makhado, I was hoping a JV or an earn in to ensure capital light and quick movement into production.
time will tell.
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