THR 0.00% 1.6¢ thor energy plc

bcf equities report, page-2

  1. 39 Posts.
    page 2

    Revenue would be split 60% from tungsten and 40% from
    molybdenum, though the ratio would be greater in favour
    of tungsten in the higher levels of the mine.
    Development Timetable
    THR hopes to have financing arranged by October 2008,
    which would enable commissioning in late 2009. This is
    about a year later than the Company was quoting in 2007
    (but we did caution that we thought its timetable was
    unrealistic at the time).
    Offtake Agreement With CITIC
    THR has signed a life-of-mine off-take agreement with CITIC
    Australia Pty Ltd for the sale of scheelite and molybdenum
    concentrates. The net price that Thor expects to receive is
    approximately $203/mtu, which is a discount to the Metals
    Bulletin quote of US$250/mtu.
    BOOT Now a Finance Option
    The specialty metals markets are known for their limited
    volumes compared to base metals and marketing
    arrangements are more specialised. The dominance of
    Chinese producers limits the transparency of these markets,
    particularly in the case of tungsten. This tends to limit the
    options available for the debt financing of projects as off-take
    agreements are traditionally not firm enough with respect
    to price and volume to be bankable.
    Recognising these issues, THR is pursuing a BOOT (Build
    Own Operate Transfer) strategy that could account for at
    least $40m of the $65m required for the development of
    Molyhil. A third party would take on this responsibility with
    the major impact for THR shareholders being a minimisation
    of dilution at this point that would otherwise come through
    heavy equity issues. Operating costs would be higher as
    there would be an element of financing charges built into
    the transaction, but the net result should be substantially
    beneficial to shareholders. A $40m contract would add
    another $20-25 pt operating cost for the duration of the
    contract, and could involve a transfer payment of $10-15m
    at the end of year three.
    THR is also considering BOOT contracts for the camp
    and power supply, which could reduce its upfront capital
    requirement to something between $10-20m.
    BGF Equities Research Thor Mining PLC Issued 22.05.08
    Commodity Price Steady to Firmer
    Both tungsten and molybdenum prices have been maintaining
    levels seen late last year, with some improvement. However,
    the continued strength of the A$ has been having a net
    negative impact. There are expectations that the tungsten
    price will be up around US$300/mtu by the end of 2008.
    Opes Prime Has Been an Overhang
    THR was affected by the Opes Prime debacle, with 4.5%
    of the issued shares and 3.9% of the issued warrants in the
    equation. These have now all been sold on market.
    Potential Earnings
    We can see the project generating cash flows of $11m p.a.
    or 7.4¢ per share based on the assumptions below. The
    prospective cash generation multiple of 1.5x is significantly
    more attractive than King Islands Scheelite’s 3x, and
    Queensland Ore’s 7.1x. The attached spreadsheet provides
    a snapshot of key parameters for other prospective
    tungsten producers.
    Capital Expenditure $65m
    Boot Finance $45m
    Net Capex Required $20
    Operating Costs $78 pt
    BOOT Costs $20 pt
    Net Tungsten Price US$200/mtu
    Net Moly Price US$26.80/lb
    Unit Cost (net of Mo) US$114/mtu
 
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