I just sat down after putting the kids to bed and did some homework on Mantra. Dug out some relevant announcements regarding the ARMZ T/O (they are still on this site under the ticker MRU)
The original offer was tabled on 15 Dec 2010 @ A$8.00/share suggesting a value of A$1.16B and US$10.26/lb of resource for the Mkuju River Project Nyota Prospect in Tanzania.
Shortly after the Fukishima quake, ARMZ revised their offer to $6.87/share plus a $0.15 unfranked dividend totalling $7.02/share and a valuation of A$1.02B
Not quite sure how they got the above total value figures as the appendix B issued 26/5/2011 indicated 137,576,308 shares on issue so I get a value of $965,785,682 @ $7.02 being the revised offer price and this is a little less than the $1.02B quoted in the statement of the revised offer on 22 March 2011, oh well, it’s only $60M. . . – back to the point of this exercise - a comparison of the Mantra T/O with the mooted bid by CGNPC for Karaoke Harry:
Prior to the final wash up, MRU released their DFS for the Mkuju Project on 6th May 2011 with the following data:
MANTRA Resource Estimate: (reported at a lower grade cut-off of 200ppm U3O8) . Tonnage (Mt) Grade (U3O8ppm) Contained U3O8 (Mlb) Measured 40.9 442 39.9 Indicated 26.8 433 25.6 Total Measured + Indicated 67.7 439 65.5 Inferred Resource 41.2 395 35.9 Total Resource 108.9 422 101.4 (reported at a lower grade cut-off of 200ppm U3O8)
So, using my valuation of $965.8M @ $7.02/share I get the following valuations: Resource Valuation = AU$9.52/lb Reserve Valuation = AU$16.91/lb
By comparison, looking at the resource update issued August 2011 for EXT: EXT: Resource: (reported at a lower grade cut-off of 100ppm U3O8) . Tonnage (Mt) Grade (U3O8ppm) Contained U3O8 (Mlb) Measured Zones 1 & 2 74.4 510 83.8 Indicated Zones 1 & 2 + Ida Dome 281.1 440 274.3 Inferred (all zones + Ida Dome) 227.7 310 154.8 Total Resource 583.2 401.4 512.9 Reserves: . Tonnage (Mt) Grade (U3O8ppm) Contained U3O8 (Mlb) Proven & Probable: 280 518 319.9
Now, based on the current exchange rates, and a suggested 270p offer for KAH I get: EXT Mkt Cap (inferred by 270p offer) = AU$2,448,546,378 EXT resource valuation = AU$4.77/lb EXT reserve valuation = AU$6.84/lb
It should be noted that the Mantra figures are based on a lower grade cut off of 200ppm, whereas the current data published by EXT has a cutoff grade of 100ppm U3O8, so at this point we can’t quite compare apples with apples.
Now, looking at Development and Operating Costs: Mantra (source DFS 6/5/2011) - Project Capex = US$430M for a 5Mlbpa operation - Opex = US$22/lb EXT (source DFS 5/4/2011) - Project Capex = US$1.66B for a 15Mlbpa operation (when scaled from the 5Mlbpa Mantra plant, that’s about 28% more expensive for the same annual throughput) - Opex = US$32/lb (about 45% higher than Mantra)
BUT when those capex costs are spread across the entire resource and reserve, I get: Mantra Capex/lb (resource basis) = US$4.24/lb Capex/lb (reserve basis) = US$7.49/lb EXT Capex/lb (resource basis) = US$3.23/lb Capex/lb (reserve basis) = US$5.19/lb
Observations: (1) capital cost per unit of annual processing capacity is greater for EXT (2) capital efficiency over entire ore body is better for EXT (no matter which way you look at it) (3) we don’t know the effect of the difference in cut off values for the resource estimate (100ppm for EXT vs 200ppm for Mantra)
So the questions are: (1) What portion of EXT is between the 100ppm and 200ppm cutoff? (2) How much is the in ground valuation effected by the higher opex and capex costs?
At this point, all I can suggest is I do not think the difference between the in ground valuations reflect the more expensive Opex and Capex for the Husab project. I also think we should see something a hell of a lot better than $4.77/lb for EXT’s resource.
Unfortunately I am getting square eyes and don’t have any more answers. Does anyone have any thoughts?
EXT Price at posting:
$7.89 Sentiment: Hold Disclosure: Held
(20min delay)