Inzaghi88 got to an NPV of $29.55B - whilst I don't think its in the post, but I am assuming US$. However, to be a bit conservative, let's call it AUD$20B (so basically halved his detailed estimates which seemed fairly reasonable without checking the math). I know that $20Bn seems like a big number, but to put it into context, CIA are producing 14Mtpa in the same region and have a market cap of AUD$3B, so not unrealistic something producing 7 times as much could be worth 7 times as much. However, that $20B is the market cap for a producing mine.
If the NPV works out to be $20B, then at a decision to mine stage (after completion of BFS etc), the project could be worth 50% of that, so $10B.
At that stage, Vale will have 75% of the project, so CLE's 25% could be worth $2.5B. But we are far some that stage. To get there, Vale will first spend $18M before deciding if they wish to spend another $120M to get to DTM stage (Decision to Mine). I read somewhere that Vale and CLE have already been working together six months (prior to the MoU). Therefore, I think reasonable probability given Vale's experience that they intend to proceed unless there is some significant and unknown factor that has not been covered by their due diligence. In particular where the high purity iron that it will produce is needed for green steel and the Canadian government have recognised high purity iron as a critical mineral - so the demand will not go away for the product.
Therefore, if you give the project a 1 in 5 to 1 in 10 chance of getting to a decision to mine, then 10% to 20% of $2.5B is $250M to $500M - I note that I would not give that probability of getting to a DTM for a project at this stage, but given Vale's involvement I think it is reaosnable.
There are 1,066 million shares currently on issue, plus around 400 million options, so let's say 1,500 million shares fully diluted to a DTM.
Therefore, $250M to $500M market cap divided by 1,500 million shares on issue equals 16.5 cents to 33 cents per share being not unrealistic in the short term - especially after CLE have their booth at RUI Explorers Conference next week and words gets out.
Like I said at the start, a rough back of the envelope calculation, but some numbers are better than none.
CLE Price at posting:
5.8¢ Sentiment: Buy Disclosure: Held
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