Interest to be earned until tax payment is due in mid 2010:
At an interest rate of 5% approx. 18 M$
Current Valuation given out by company regarding their netto cash :
45- 46c/share -> 227 M$ AUD Market Cap
Major Shareholders: ANZ Nominees 17.7 % Evraz Group 12,4 % Power United 10,2 % Marampa Iron Ore 9,0 % HSBC Nominees 6,1 % Directors & Man. 4,9 %
Top 20: 75,3%
Tight Capital Structure with 3 major groups :
Evraz, Delong, Power United.
Latest events:
1. Antony Sage is looking for a buyer in regard to Evraz’s stake in Cape Lambert Limited. It will potentially go to 4-5 institutional investors with the price yet unknown and a release on further information pending.
2. According to Antony Sage, MCC is likely to buy Cape Lambert South as this was their original intention when they acquired Cape Lambert North for 400M$ AUD. MCC want to be the only player in that area and are thus waiting for the project to reach JORC status. Drilling by CFE is progressing nicely with drilling results expected in December. A JORC compliant resource is scheduled to be released in the third quarter next year on which MCC is expected to make an offering.
3. Current estimates for the project’s potential value are around 300M$ AUD. One has to consider that MCC are looking for a long term supply of the Chinese market and are thus not influenced by the current market turmoil as commodity prices will recover once the worst of this financial crisis has passed.
4. Cape Lambert Iron Ore Ltd. is expecting to announce further information regarding 4 - 5 other acquisitions in the next couple of weeks. The current market turmoil revealed great opportunities which provide excellent potential for the company to capitalize on
Marampa :
The Maramapa investment included an issue of 44 M shares to African Minerals Ltd. and an initial expenditure of 5 M$ USD for the drilling campaign. If the projects economic potential and/or results turn out to be unfavourable Cape Lambert Limited has the right to withdraw from their agreement with the 5 M$ USD and the issued stake for African Minerals being the only expenditure. The 240M$ cash will remain untouched, thus guaranteeing the netto cash assets of 45c/share.
Expenditure in financial year 2009:
The company expects the cash outflow to be around 9 M$ in 2009, thus strictly keeping the cash together until market conditions improve.
Outlook:
There are several major scenarios with huge upside potential for Cape Lambert Limited in the upcoming months:
a)
The Cape Lambert South resource reaches JORC status and gets sold to MCC for a reasonable price.
b)
The sale of Evraz’s stake in Cape Lambert Limited might trigger a takeover offer as Cape Lambert is trading at a 50% discount to its intrinsic value or rather cash backing.
c)
The currently investigated, potential acquisitions add significant value to the company as market comditions improve and investors value the company according to its assets.
d)
Iron ore prices / commodity prices increase as the financial turmoil/ credit crisis draws to a close.
e)
MCC is interested in the Marampa project since they’re interested in an exposure to Africa and are thus likely to pay an immense price for a JORC compliant resource in Marampa.
f)
The company is revalued / rerated according to its cash assets.
Valuation:
The shareprice is expected to reach the company’s intrinsic value of around 45c - 46c / share in the short - mid term with an ultimate price target of 1$/share on sale of a JORC compliant resource ( Cape Lambert South or Marampa ), on capitalization of acquired projects or a potential Takeover offering.
Copyright Sellier
CFE Price at posting:
21.5¢ Sentiment: LT Buy Disclosure: Held
(20min delay)