Hi ALL
I put together a bit of info for Galaxy V KDR with some numbers.
GALAXY (GXY) -
Overall the company's production is advancing quite quickly. They had 120k tons contracted for sale for 2017, which would generate over $100m in revenue. As of the September report, they've taken in $70m in revenue in the first 9 months of 2017. They're generating good sales and have a decent cash balance too ($57m). Their unit production cost seems a bit high (US$320-$400 per ton) whereas KDR believes they can produce at closer to US$200.
I think the valuation at $1.5bn is way too high at the moment, but they're trying to ramp production to 160ktpa and that will gradually grow higher. If you do the math though;
120ktpa at $850 per ton (average based on the May 25th announcement) with a cost of around $350 leaves a profit of $500 per ton.
$500 x 120kt = $60,000,000 profit before tax. After tax (30% effective rate) profit of $42,000,000. They probably won't be paying tax for a while because of the losses they've run up in the past few years, so factor that in.
If you apply a standard market average 16x earnings multiple you can value this particular contract at $672,000,000, which is one portion of the market cap.
If they ramp this particular contract up to 160ktpa, assuming cost and sales price remains the same, you can get a value of about $896,000,000. They have said costs will reduce over time which is OK, but sale price might fall too as more competition comes on line.
That's fair value based on what they're producing now. Then the market will add on some $$ for their other tenements and projects, and the fact they're still exploring. Plus the cash balance etc.
Kidman (KDR)
If you apply this to KDR it's very interesting because they want to produce 288ktpa for the Earl Grey lithium project. Cost base of $205 and sale price of $685. So a profit of $480 a ton, applied to 288ktpa is $138,240,000 in gross yearly revenue. Strip out tax and you get $96,768,000 yearly net profit.
Attach a 16x earnings multiple and you end up with about $1.5bn for that project alone. That's assuming they don't ramp up production or anything else. Then you factor in cash on hand, and their other tenements and who knows where it could end up. It's just a matter of locking in the off take agreements.
IMHO ........
GOOD LUCK TO ALL. GXY AND KDR
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