Credit Suisse $5.26 blue sky valuation

Highlights of Credit Suisse report;
- Projected $0.28 dividend within a couple years
- $5.26 plausible blue sky valuation
See below

Headline numbers

Valuation, capex, opex, and production profile based on CS estimates.

Valuation

• NPV-driven base case valuation: A$2.40/sh.
  
  
• Spot commodity price valuation: A$3.99/sh.
  
  
• Blue sky scenario (plausible upside): A$5.26/sh.
  
  
• Grey sky scenario (unlikely downside): A$1.06/sh. Restart capital
  

• A$50mn indicative recommissioning capital.
  
  
• A$25-50mn working capital (operations, contingency, and corporate working capital). Operating cost
  

• A$20/t operating cost ($ per tonne of ore processed) comprising: Hydraulic mining $1.50/t material mined; processing $10/t; transport $3/t; administration $0.40/t; smelting cost US$172/t (US$/t of concentrate, equivalent to ~A$8.50/t ore); less $2.60/t silver by-product credit. This excludes royalties.
  
  
• All-in sustaining cost US$0.50/lb payable zinc. Annual production
  

• 15Mtpa of 3.02% zinc tailings processed.
  
  
• 64% average zinc recovery to a 52% zinc concentrate.
  
  
• 290ktpa contained zinc in 560ktpa of concentrate; 246ktpa payable zinc in concentrate.
  
  
• 1.55Moz of payable silver in concentrate (70% recovery and 70% payability after a 90g/t smelter deduction).
  
  
• Zero lead payability of lead in the zinc concentrate during the tailing retreatment phase. Mine life
  

• 5-6 years of 290ktpa zinc production (246ktpa payable) supported by a 15Mtpa treatment rate of the 79Mt measured tailings resource.
  
  
• One additional year life supported in-situ hard rock resource at a potentially high 80% recovery on a notional 3-4Mtpa processing rate.
  
  
• Up to four years of highly probable hard rock mine life extension from advanced, pending resource additions proximate to the mill (CS models three years total hard rock mining and processing "Phase 2" post the initial tailings processing).
  
  
• No life extension assumed from exploration conversion of identified prospects.
  
  
• 30-year phosphate processing at the end of mine life; production rate 1Mt p.a. concentrate grade 32% with a US$60/t concentrate FOB cash margin (but only a 25% value attribution of the project included in our NPV).
  

NPV in more detail

• A$3.99/share (A$2,141mn) spot NPV fully diluted by 100% options exercise.
  
  
• A$2.40/share (A$1,290mn) CS NPV fully diluted by 100% options exercise.
  
  
• No value attributed for exploration potential.
  
  
• A$70mn net quarantined cash assumed to remain trapped in the business for end of life environmental obligations (i.e., environmental obligation reduced by $123.7mn through ongoing remediation works).
  
  
• A$65mn value (15cps) attributed to end of mine life phosphate processing, which is 25% of our phosphate NPV. Our estimates are based on 1Mt p.a. phosphate production sale price US$100/t, US$40/t all-in cost.
  

■ A$53mn recognised for asset sales comprising $3mn plant and equipment.o $35mn for 49% interest in cattle station.o $15mn for Zodiac coal deposit in US (nominal value