diy shareprice

With lot's of discussion around whether an SP of $2 or more is realistic in the short/medium term, or if something lower than $1.50 is all that can be expected, it may help to have a method of calculation.

It's all about money, if MHM is going to make lots of it, so are we.

So I'll start with this set of parameters to try and estimate how much could be earnt and anyone who wants to, can have a go at it.

***************************************
TP = Tonnes of waste processing capacity per annum

SlagPT = Salt slag revenue per tonne.
NmpPT = NMP revenue per tonne.
Rev = revenue from SaltPT + NmpPT
PC = Processing costs per tonne.
***************************************

For a 300k tonne per annum plant being built:

Case 1

TP = 300,000
SaltPT = $300
NmpPT = $300
Rev = $600 (SaltPT + NmpPT)

PC = $100


The formula would be:
(TP * Rev) - (TP * PC)

This gives us
(300,000 * $600) = $180,000,000 -
(300,000 * $100) = $30,000,000

Total operating surplus = $150,000,000 per annum

If the figures are changed so that it's a 200k per tonne plant, salt slag returns $250 and NMP $150, but processing costs stay at $100, it will be:

Case 2

TP = 200,000
SaltPT = $250
NmpPT = $150
Rev = $400 (SaltPT + NmpPT)

PC = $100

(TP * Rev) - (TP * PC) gives us
(200,000 * $400) = $80,000,000 -
(200,000 * $100) = $20,000,000

Total operating surplus = $60,000,000 per annum

Make your own guesses on the P/E for those numbers, once tax and other costs, i.e. repayments and admin are taken out, but they represent the bulk of the equation.

I think that if there is government support, as seems likely, the risk factor applied to the contracts will be lowish and we're likely to see the market attribute a lot of the future income to the SP quite rapidly.

Cost and revenue

Costs in the October 31 quarterly report showed revenue of $1.677m and an operating surplus of $1.015m, which would have costs at a bit over 1/3 of revenue, meaning over $100 pt. I am very confident that salt processing costs per tonne would be much lower than that as processing capacity goes up, but NMP costs may have a higher energy component.
On the other hand I have also heard rumours of NMP return per tonne being well $300. They are certainly not going to process it at a loss.

If the contracts are seen to be secure, then a bigger P/E might also be applied, keeping in mind that MHM will still be a growth stock with Europe and Canada to take care of after the U.S expansion.

I also have not added the OZ processing revenue to the equation, but you could just add it to the tonnes processing column to get a reasonably accurate guesstimate.

Adding SPL as a later revenue source will greatly aid the bottom line.

If this is not all too geeky and other people want to have a go, please do, the SP on either of the two cases presented above would justifiably be well above $2 IMO.