Argosy Minerals is the most undervalued stock on the ASX. Let's...

Argosy Minerals is the most undervalued stock on the ASX.

Let's put this in perspective and look at simple fundamentals before we get too excited:
* 100 million shares @ roughly 70c = market cap of about $70m more or less

Argosy's main resource is the Musongati nickel deposit in Burundi. This project has been plagued for years by the political instability in Africa generally, and Burundi specifically. Burrundi is also landlocked and therefore it's at least 2000km to transport the minerals from Musongati across the border with Tanzania to the nearest port. Big logistical nightmare, but not impossible and certainly can be achieved.

Now what exactly is the Musongati deposit?

According to the US Geological Survey Minerals Yearbook 2006 for Burundi "resources at Musongati were nearly 185 million metric tons (Mt) that graded .31 % nickel, 0.17% copper, and 0.08% cobalt."

Nickel is a key component of steel (like iron ore - note FMG/FDL/JMS hype) and there has been a demand/supply imbalance throughout 2006/07 with a small surplus forecast for 2008.

At current Nickel prices, the Musongati deposit (excluding the value of the copper and cobalt reserves) makes this worth in excess of

Let's not forget Xstrata acquired Falconbridge for $17 billion in 2006. It recently bought LionOre, number nine in the world's nickel market for nearly $5 billion. Xstrata is the fourth-largest nickel producer in the world, with an annual production of 110,000 metric tons. LionOre reported annual nickel production of 34,094 metric tons last year.

LEt's get back to the facts - Musongati is a 185 MILLION METRIC TON deposit - this is GLOBALLY SIGNIFICANT.

So assuming this deposit is worth $5 billion, less $3 billion for capex, infrastructure costs etc that crudely equates the remaining value of Musongati alone to over $2 billion.

Back to basics, Argosy is valued at roughly $70 million (based on a 70c share price). Valued at $2 billion the share price should be roughly $20. Obviously Argosy hasn't got the capital to get from deposit to mine to port to mouth but the big guys do - Xstrata, Lionore, BHP, RIO, CVRD etc. For either of these suitors there is little upside paying $20 per share for Argosy (read Musongati) but there is enough to make everyone happy with a floor price of $10 per share.

Do the maths.