re: mls target 2mt and 30cent target Hi FedExpress,I did a...

re: mls target 2mt and 30cent target Hi FedExpress,

I did a similar calculation some time ago, but got quite a different result (still good I thought). I used slightly different assumptions and modelling to you (simplified for this post) using the current resource of [email protected]% and am more conservative. Anyway have a look at this and you may be able to point out some errors in my calcs.

Current resource = 1.05 [email protected]% Zn = 80,422 t
% resource owned = 80% = 64,337 t
(this was also discussed in another thread, refer to http://www.hotcopper.com.au/post_thread.asp?fid=1&tid=385984#1359731)

Value of resource @ US$4000/t * 1.285 ($US/$AUS) = AUS$330.69 m

(Even though current prices are closer to $4,500, I used $4000 to be conservative for longer term c/flows. Note, given BioHeap's metallurgical testing reults of 97.1% I assumed 100% recovery for simplicity)

less capital costs of $50 m = $280.69 m
less operating costs of $0.40/lb ($70 m) = $209.9 m
less tax @ 30% = $146.9 m

approximating dcf with a multiple of 0.50 (could be lower depending on the lag to production)

= 0.5 * $146.9 m = $73.47 m

Then adjusting for risk (risk of management not moving project into production) = 80%

= $58.8 m

exercising 100 m options @ $0.05 providing $5 m cash

= $63.8 m

plus $6.5 m cash in the bank

= $70.3 m

accounting for shares (669,608,765 + 100,000,000 exercised options) - excluding newly issued options.

= $70.3 m / 769.6 m shares
= $0.09 / share

Now this price is current and makes no assumptions about the impending resource upgrade, which will no doubt have a significant positive impact on the sp.

The price also ignores their other projects, namely, Namibian Uranium and Sherlock Bay. I will assume a value of $15 m for these (could be worth more and the uranium play will probably be valued higher as a divestment).

$15 m / 769,608,765 shares = $0.02 / share

Overall,

sp = $0.09 + $0.02 = $0.11 / share

Cheers
SBC