ml comments as promised

�� $7/sh target is below our NPV valuations of $8-10/sh
We have raised our price target to $7/sh on a 12mth view. It could have been
higher, but we believe there has to be some account for the risks that still have to
be removed (resources, costs, competition for the port, start date etc). In 12mths
time, the market should have all this information, for better or worse, and if our
conservatism was groundless, we would be lifting our target further.
What is MMX worth on PERs?
We are forecasting 0.65cps earnings in 2013. MMX should trade on around 14x
those earnings (because they are based on trend iron ore prices) which prices
MMX at $9.10/sh. Discounting to today at 10%pa, that share price has an NPV of
$5.17/sh. In addition, MMX will potentially return spare after tax cash of $2.85/sh
in H1 2008E. The discounted 2013 share price and the cash total $8/sh.
NPV $5.85-10.62/sh
Our NPV of $5.85/sh still includes upside potential of $4.77/sh if remaining
conservative assumptions are relaxed. We are reluctant to waive these
assumptions in advance of data releases, but if we did, our NPV could be as high
as $10.62/sh.
Mitsubishi valuation has upside potential in our view
We are assuming Mitsubishi pay $1500m for 50% of the JV, based on valuing the
project ungeared at our estimated Mitsubishi nominal (ie with inflation) WACC of
7%. If additional tonnage third party tonnage can be committed to the rail and or
port before the Mitsibishi valuation is set, we believe the buy in price has potential
to increase.

TheGimp