Ann: Port Keats Rock Salt Project Major Evaluatio, page-12

re: Ann: Port Keats Rock Salt Project Major E... "Where on earth is all this talk of Wonarah being uneconomic coming from?"

Look, if Wonarah is economic just on opex costs i.e. they can turn a profit with the current phosphate price, which I suspect they can, providing they can get a decent enough throughput (not that pitiful 500,000 tonnes p.a. figure
they have talked about with the railway operating at its current full capacity i.e. with no extra money spent on sidings to enable two trains to pass each other) then you can be sure that in view of the size of capex requirement it most certainly IS COMPLETELY UNECONOMIC at current phosphate price ($130?).

With a volatile commodity price and no other source of income, the rational investor in this company (for taking a risk) needs an expectation of between 15% and 20% p.a. returns (there may be a few irrational investors who post on this site who can get by with expecting less than that but I am not talking about them). With such wafer thin margins at the opex level, and the utterly huge no. of shares that would have to be issued to raise that $200m capex at current share price of 24 cents, there is no way the wafer thin margins spread over that no. of shares are going to yield anything like 15%. SO IT IS COMPLETELY UNECONOMIC FOR THE RATIONAL INVESTOR. For the bulls however there is one thing which could change everything: if the phosphate price moves up. I forget, but Mr Richardson mentioned something about $75m of NPV being added for some minute %age rise in the phosphate price. (I don't expect the relationship is a linear one but it's some indication of just how leveraged MAK is to the phosphate price).

P.S. For the regular posters on this thread I take no credit for my prediction (when MAK was over 45 cents?) of 25 cents coming right. JD Victoria slagged me off with all that FUD stuff when I made that prediction. I take no credit because I failed to sell my MAK holding and I never predicted Australia would have such a politician who would dream up the Resource Profits super tax. On the basis the RSPT isn't going ahead on phosphate, I think MAK shares are currently valued about right on current phosphate price outlook. I remain long.