at a current price of 59.5c, the market is pricing in one of the following:
1. WR spends $28M and then says it's all too hard and liquidates the company, or
2. The detrital results are so bad and take so long to come out that number 1 has occurred.
3. The economic malaise continues forever and ore prices never recover their former highs (and worse) - I will get to that more in a moment
4. WR and co are conmen, and run off to Brazil with $28M, not to work at Vale but to sit on the beach in Rio, lol
5. ??
How pessimistic does one have to be to value BRM at "toxic waste" as Mozart puts it.
To put some perspective around a possible valuation (my opinion only) after the announcements from Vale and Mt Gibson recently.
If we make some assumptions for BRM, product is saleable and production ramps up to 10mtpa by 2014 and stays there. It has to spend $0.5B on a detrital plant and railway, issue 125M more shares and fund the rest with debt, a USD price per tonne of $44 supports the current share price in NPV/DCF terms over the period to 2024.
That is, prices NEVER rise again (nor fall) from $44 per tonne and costs rise at 3% per annum (probably less in a "doomsday" environment).
If we take what the analysts are saying, then they are pricing a 20% fall in IO. Easy to do after the event to change your target, but lets say 30% is more appropriate. Same assumptions re capital and debt raisings and production - then the NPV per share is now $4.23 over the same period.
All in all a company with a "terminal" NPV per share if a few dice roll the right way of $38 or so on my humble reckoning, trading at 59c with all the naysayers that are invading the board, including the impatient. A company that could (and I stress could) possibly be a 70 odd bagger is likely to come under threat from all sorts of factors.
In my opinion, the management team is first class from an investors point of view. Day traders and others will no doubt hate that WR has not ramped the results of the detritals, the ore body, etc...... the lack of offtakes would be killing them.
Investors however should get comfort from a management that is trying to position the company for the long term, to unlock the massive value that is below the surface in this company. The detrital results are the biggest outstanding issue, but a competent management team based on the evidence to date has said a simple, cheap process to beneficiate.
If there are beneficiation experts (and I mean professionals) on this board, then state your credentials and your case.
Opportunities for multi-bagging stocks are few and far between for investors of true value and whilst clearly risks (both company specific and the world as we know it) are still out there, lets not just follow the herd this time. Stand by your 100's in some cases 1000s of hours of research and live by the decisions (your conviction).
Selling BRM at 59c does not make sense on the facts available.
BRM Price at posting:
59.5¢ Sentiment: LT Buy Disclosure: Held
