I have a fairly elaborate model that I need to re-examine,...

I have a fairly elaborate model that I need to re-examine, because it was developed many months ago, and if I thought more about it with the benefit of hindsight, I would now simplify the assumptions, and reduce the elaboration.

As it stands, the model values the SP at circa 30c, but that is the result of various conjectures that are moot – for instance, the EBIT per tonne, the tonnage itself, the year selected as base year for the calculations, the EBIT multiplier selected, the rate of interest used to reduce the base year to 1/07/2022, et cetera. This is more gut-feel than factual.

I selected FY25 as the “base year”, and the tonnage for that year being 400,000 tonnes. This assumes Stage 2 is built in CY23, and is producing at full capacity by 1 July 2024, which output would hold for a few years as WAK waits for the rail connection. If FY25 is too bullish for 400,000 tonnes, then one would use FY26, which must be discounted to PV by another year at an interest rate of 7%, so the model is fairly tolerant of delay. Conceptually, the model is not constrained to work in financial years – any 12-month stint would work, provided I sophisticated the Present Value calculations using date arithmetic.

	Column 1	Column 2	Column 3	Column 4
0	EBIT Mult ↓​	EBIT/Rev​	EBIT tonne​	PV=est SP​
1	8​	33.33%​	$100.00​	$0.4626​
2	​	30.00%​	$90.00​	$0.4163​
3	Interest rate↓​	27.00%​	$81.00​	$0.3747​
4	7.00%​	24.30%​	$72.90​	$0.3372​
5	​	21.87%​	$65.61​	$0.3035​
6	Yrs for PV↓​	19.68%​	$59.05​	$0.2732​
7	4​	16.67%​	50​	$0.2459​
8	Base Year↓​	15.94%​	$47.83​	$0.2212​
9	4​	14.35%​	$43.05​	$0.1992​

Note that the “PV = est SP” column is based on an estimated profit for 400,000 tonnes, divided by all the shares and options, and reduced to a Present Value at 7% for 4 years.

An improved level of confidence in the EBIT per tonne, and preferably for the EBT per tonne, would be handy. The model works at constant currency – the assumption being that prices will increase in future to match inflation, and hence the 7% interest rate used does not attempt to cover inflation, because the whole idea is to produce a share value now, not in FY25 (the selected base year).

If you ask me to elaborate on specific points, I would do so.

I did not want to ask Andrew too many questions when I spoke to him recently, because he is not free to tell me things that other shareholders are entitled to know. I would like to get a feel for a reasonable FOB price, and profitability. Because I assume all options would be exercised, and hence the value per share is reduced, I think the need to borrow funds would be low, so EBIT and EBT would be fairly similar.