bby repor, page-2

I have not seen the new BBY report but I have re read their old reports. It seems to me that BBY have not undertaken a thorough financial analysis to come up with their past valuations of MMX.

Maybe they just looked at the same fundamentals as I have and come to the same answer - huge profits once the rail and port infrastructure have been built. Because the dollars are so big I suspect BBY and other analysts have been overly conservative with forcasting sp growth.

I guess they will uprgade and consider all the other issues that Merrills referred to when they valued mmx at $5+. I suspect they will account for long term price rises in iron ore as being a major factor that would build considerable confidence in MMX as a successful long term miner and thus its prospective sp should reflect that potential success.

BBY have in past report valued mmx sp at $3.55 and thus guaranteed to increase due to:
1. high quality ore (64%);
2. large ore body;
3. experienced management;
4. take off and longer term contracts in place in Korea and China;
5. increasing ore prices;
6. government support for infrastructure development;
7. In production and no longer an explorer so the long term customers have opportunity to test the ore in their steel mills.

I bet if BBY have raised their sp valuation of mmx it will be 1/2 way between the $5 and $13.20 mentioned in the Merrills report ie about $9.10. Just a guess though.

MMX will be selling about $25million tonnes per year and make a profit of about US$40/tonne; for 25 years. You can get some idea of the value by this simple back of envelope calculation, which of course doesn't account for all the variations that will arise along the way such as changes in ore prices etc. But its not a bad guide and a similar calculation can be applied to FMG and its sp is about $40.

My valuation of mmx sp is $15-20 in 2 years. But there is very little financial analysis in that, just an educated guess.