Monktrader, when you have a chance can you please justify why you may consider NAE overvalued at this price? I understand it has had a negative turn after running from 0.004 to 0.041 but even at our recent highs i still considered the company undervalued on our potential projects.
We have 3 possible projects with great potential. Redmoor, Lochinvar, Otago plus around $1.75M cash and $0.6M in CRL. That leaves us with an enterprise value of roughly $3M.
Redmoor
Is classified as a high grade tin project, located within close proximity to Wolf's Drakeland mine. Redmoor has a higher and easier to process ore than Drakeland, which potentially should reduce our cost to process. NAE have also mentioned and considered in the past a joint processing deal with WLF to use their plant to help process our ore. This may potentially reduce our overall capex as their mine is already fully operational and close by.
The current drilling programme is to help identify further high grade targets and potentially increase our overall resource. Management have stated that there may be a chance for a 2-3 time increase in our high grade ore, which will substantially increase the value of this project.
Redmoor has a current valuation of $10-15M for our 50% stake in the project. We are beginning our second phase of drilling with the programme due to be completed by October. This project has already received the go ahead by local government and is accepted by the locals, with plenty of jobs being offered to the local community if mining is to commence.
Lochinvar
Is considered as a world class coking coal project, also with in close proximity to supply local UK steel mills.
This project has previously seemed to be put on the back burner but has massive potential if progressed.
Current NPV of US410M and potential to reduce time until production with current further drilling programme. This drilling is to help identify a further extention of our current resource and possibly identify a nearby shallow seam. This will also decrease our initial capex as it will be easier and more accessible to mine, generating an initial cashflow before full production.
"The valuation update has resulted in a substantial improvement in project economics from the 2014 results. The project now has a base-case NPV9%, determined to an accuracy of ±40%, of approximately US$410M, an IRR of approximately 27% and a payback period of approximately 4 years."
When also compared to peer valuations of other coking coal companies, Lochinvar is considered undervalued with a higher and easier accessible inferred resource.
Otago
A newly acquired gold tenement with little exploration conducted. This too has massive potential if management and researchers are correct. Dr Mackenzie has provided extensive research on these tenements and believes that they show similarities to nearby gold tenements. This has the possibility of a >10Moz mine if his research is right. I am currently not providing a value on this as it is too early to judge and no major indicators have been found as of yet.
Management have also stated in the past that they may also consider more advanced gold aquisitions in the future. I have not heard much on this for a while but hope to see them continue looking for potential projects.
Overall
The potential of NAE is huge, with our JV partner SML recognising our Redmoor project as a "Juggernaut" and a game changer for their company. Just this project alone is enough to justify our current valuation, let alone our other two projects plus current cash position.
We also have a very tight share registry with top 20 holding 73.88% from the previous annual report. This includes our top shareholder RCF holding 40.77%. These numbers would have changed after recent capital raises and placements, but i cant find access to most recent updates at the moment.
RCF is also the major shareholder of nearby neighbor WLF. Only speculative but this may also form a part possibly in the future, if a joint processing plant is considered between NAE and WLF.
Not sure if you are also following commodity prices at the moment but gold, coking coal and tin all seem to be in favour and on an incline. Gold has just hit a one year high and looking to break a technical resistance level and confirm an long term uptrend. Tin is also in a steady uptrend and looking to have a strong outlook. Coking coal which was the best performing commodity of 2016 has also recovered nicely after having a massive downfall. This has remained under the radar and is slowly and consistently increasing each week. Current prices are much higher than our projects break even value and approximately around the benchmark price for our US$410M NVP.
NAE Price at posting:
1.0¢ Sentiment: Buy Disclosure: Held
(20min delay)