Is GME undervalued?, page-10

GME is looking more & more interesting because:
1. Heap leach project
2. Successful performance of pilot plant
3. High recoveries (95% Co)
4. Planned production of battery grade nickel & cobalt sulphates
5. LME Co price = US$75,000/t (From US$70,000/t 0n 7/12/17)

So I had a go at a ROUGH NPV calculation. Here it is
A, Assumptions:
1. LOM = 20 years
2. Using Measured & Indicated JORC R&R only
3. Annual Production: Co = 1,000 tns. Ni = 13,000 tns
4. Product prices: Co = US$75,000/t. Ni = US$5.00/lb
5. USDAUD = 0.75
6. C1 = A$5.70/lb Ni (Before Co BPCs)
7. Royalty = 4%
8. CTR = 30%
9. CAPEX = A$300m
10. Sustaining capital = A$6m pa
11 Funding: Debt/Equity = 67%/33% at 30cps
B. Results:
1. Post tax NPV(8%) = A$860m. PFDS = A$1.00
2. FCF = A$118m
C. Valuation in full production:
1. FCF valuation = FCF x 10 times = A$118 x 10 = A$1180m.
2. PFDS = A$1180/864 = A$1.36

While GME is a Ni producer with Co by product the increasing Co price is more then compensating for the low Ni price and it is Co that is driving the economic feasibility of GME. SAVED BY COBALT.
As the Co price is on a powerful uptrend, it will continue to improve the economics of Niwest so becoming a very attractive project. Nevertheless please DYOR