irn valuation estimate

Xstrata own 70% of the El Morro copper/gold project in Chile.
Xstrata’s stake of measured and indicated resources is 2 million tonnes of copper and 5.7 million ounces of gold. Market sources have suggested a US$700M price tag for Xstrata’s 70% stake in El Morro and the Chinese are favoured to buy it.
Project economics are similar to Tampakan.
The Chinese are prepared to pay US$700M for 70% of 2 million tonnes of copper and 5.7 million ounces of gold. EV of total project is circa US$1Bn.

Now, let’s look at Tampakan.
Xstrata’s stake is 62.5% of 12.8 million tonnes of copper and 15.2 million ounces of gold.


What does that value Tampakan at?
Tampakan has 6 times as much copper and 3 times as much gold as El Morro (which has an EV value of circa $1Bn).
Conservatively, one could value Tampakan at a multiple of 3 times El Morro. Note: that is conservative. Therefore, an estimated EV for Tampakan is US$3 Billion.

IRN’s stake is therefore valued at circa US$1Bn. This equates to AUD$1.17Bn.

Therefore, fair value for IRN using El Morro as a guide is $3.00 per share.

Food for thought.