does atlas equal monarch or fortescue

I was frightened by the Atlas Diggers and Dealers presentation. I'd have loved to attend to hear Flannagan's verbosity to accompany the slides - perhaps he could explain properly;

- How come we should invest if the EV of $610M was 12% less than the Market Cap (at $2.63/sh) of $750M? A hard sell at the best of times. Perhaps this is why the shares are now floating at $2.28 or a market cap of $654M - much closer to their Enterprise Value. Clearly didn't do anyone favours letting that cat out of the bag.

- How can the company, which has delayed its 1Mtpa DSO start-up to December and counting, quintuple this by 2010 when it has +2Mtpa in DFS study stage (the "3Mtpa" Pardoo upgrade) - where's the extra 2Mtpa coming from?

- Scratch that, how can they get a conceptual 9Mtpa in 2011 by adding 3Mt at Abdydos to 3Mt (the 3Mtpa Pardoo rate)? Or, even if it's 1 + 3 = 4 at Pardoo, it's still 4 + 3 = 7Mtpa in 2011. Where's the missing 2 Mtpa?

- Can he explain how he gets to 16Mtpa in 2012? Is this by sacrificing 66% equity in the 15Mtpa of magnetite from Ridley?

- Can he explain how there's a 1:1 linear relationship between the conceptual tonnes shipped and the revenues, given that (one would assume) the profit per tonne from Pardoo vs Abydos would necessarily vary according to method of mining, distance to port, method of transport, the FMG fees for use of the railway, the grade of the deposits, etcetera. Let alone a reasonable assumption of a easing in Fe prices in the next 3 years, and/or in the case of Ridley, the onerous debt and financial costs assumed in a billion-dollar capex even taking into account the equity loss Atlas is alluding to by not including Ridley in the figures for 2012? Or what's going on, I mean, OK, it's just conceptual, but this sounds like cold fusion to me.

I have seen this grandstanding, supercillious, pat and ridiculous goal-setting grandiosity in two memorable cases in recent years. One is Monarch, which should be producing 500,000 ounces per annum by now. The other is FMG which should be producing 45Mtpa of iron by now. Both companies set their goals at lofty heights, and the punters followed. This gave momentum, it gave cachet, it made them household names. One has failed dismally, the other has succeeded.

The difference is reserves. FMG has lots, Monarch never had any. Atlas has 14Mt - barely enough for 2 years of the next 4 years conceptual production which will total 32Mt of ore. Given their resource:reserve conversion they need to find an extra 40Mt of resources in the next 4 years to meet their concepts, and this is ignoring the missing 2Mt of dirt they produce by cold fusion. 40Mt in 4 years is a dire burden on their exploration arm.

In my opinion, which is worth its weight in vinegar, you are foolish to buy Atlas for more than a buck. If they produce DSO for $45 a tonne profit, this might value them at $160M for the next 12 months. If they produce 6Mt for $45/t profit in 2009 and not 3Mt as it would seem likely, then you'll be fine. But if the 2Mt stays missing, there's a good reason to suspect that they won't get back to $650M till 2012, at which point, and no mistake, they won't be making $45/t on Ridley, Abydos and Pardoo.

Caveat emptor. Get Flannagan to explain the maths to you.