Not sure what you are really thinking but this is how I see it on a very basic view. I could well be wrong in my basic assessment and happy to be corrected if that is the case.
Operating costs according to MOL feasibility statements say around US$8/lb to US$9/lb. Let's use US$10/lb.
Let's say US$20/lb for revenue (as per MOL estimates)
Note as per MOL Reports 10mtpa will not be produced until at least year 6. I am of the understanding that the 10mtpa includes copper production as well. Correct me if I am wrong.
For simplicity we will use the copper production as part of the Moly production since it will only contribute 15% to revenue over the first 10 years of production. By doing this I am being conservative and there could be possible upside from the figures below (to the tune of approx 10 - 15%)
2,205 lbs = 1 tonne.
According to MOL Reports -
Moly production
Year 1 - nil Year 2 - 4.5mlb Year 3 - 8.0mlb Year 4 - 11.4mlb Year 5 - 7.1mlb Year 6 - 9.2mlb
Year 1 Revenue (US$20/lb) - nil Year 1 Expenses (US$10/lb) - US$63.7m (per MOL Reports) Year 1 Cash Loss $63.7m
Year 2 Revenue (US$20/lb) - US$90m Year 2 Expenses (US$10/lb) - US$45m Year 2 Cash Profit $45m
Year 3 Revenue (US$20/lb) - US$160m Year 3 Expenses (US$10/lb) - US$80m Year 3 Cash Profit $80m
It gets better over the life of the mine.
Not factoring in depreciation and interest costs it puts MOL at current price of $1.15 on a PE multiple of 5.2 but that's based on a 4 to 5 year forward multiple.
My point is that they are at least four years away from recouping the first years operations based on THEIR costings and Moly PRICE assumptions.
Things to consider, costings could be materially incorrect due to delays, inflation pressures, labor constraints etc etc, GFC2, many variables.
I still believe that the Iron Ore operations will not produce cash profit. Cashflow perhaps to meet admin costs, working capital etc. We will find out end of January.
My thoughts. Of course DYOR.
Cheers,
;) Nic
MOL Price at posting:
$1.15 Sentiment: LT Buy Disclosure: Not Held
