I don’t disagree Roy but I don’t think it’s as inconceivable as some may make it out to be (though I too see it as very unlikely). Nifty i think they could get $50m present value legitimately (whether that’s in cash, equity or future royalties is to be seen), wingellina I think $20m is more realistic.
Let’s say both eventuate and the company is left with $50m net cash, 50% of Renison and 900m shares on issue for ease of rounding. That’s means you need a valuation of A$850m for MLX’s share of Renison to get $1/share. Let’s ignore taxes as they are sitting on large tax losses now.
How does Renison (incl. Rentails) get a valuation of $A$1.7bn on 100% basis (pre-tax)? Let’s value Rentails at A$200m based on DFS and Renison mine at $1.5bn. I think you’d need 10 year minelife at $200m pa to get that type of valuation for Renison. A ten year minelife is circa 7.6mt of ore or 145kt Sn. Not unrealistic?
From the information I’ve gathered it’s going to cost circa A$40m in capex to develop area5 - which is 100% basis and over a couple of years. This is ventilation from surface to 1100m RL as well as drainage of the UG and development.
The ore is steeply dipping and at that depth and with the material surrounding the tin, there does need to be more thought and cost into roof support / pillars etc. So let’s add $20/t to the current $160/t ore cost base.
0.76mtpa x 1.9% Sn grade x 75% recovery x $180/t ore cost gives you 11ktpa Sn at a cost of A$12.5k/t. With these variables/assumptions a tin price of A$31k/t would be needed to get that A$200m pa of free cash flow per annum.. or US$21k/t at a 69c exchange rate. Given most have the LT tin price around this mark I don’t think all of the above is totally inconceivable though I would admit it is highly unlikely.
MLX Price at posting:
7.7¢ Sentiment: None Disclosure: Held
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