my target price is $1.59. last traded 60 cents

I know, that is a large percentage difference. I will try to explain how I came by $1.59, and what my assumptions are. (feel free to pick holes in my assumptions or facts).

There are 5 main components to CXM's value.

- The near term DSO out of Port Lincoln
- The WISCO magnetite JV
- The Baosteel magnetite JV
- Current cash
- Cash from WISCO share issue

DSO OUT OF PT LINCOLN

Assuming Ministerial approval, this is scheduled to begin in the March qtr 2010.

1.6mtpa DSO, at a cash cost of A$37/t FOB.
The current spot price is around US$50 FOB (about A$58/t)

So the cash margin is A$21/t, or just under A$34m pa. This is a planned 6 year operation , and assuming no rise in the A$ price realised (or costs), and a DCF of 10%, the NPV is

A$143m


WISCO MAGNETITE JV

Here I take a different approach. Because a BFS has not been done and the resource is uncertain, I will just infer a total value BASED ON WHAT THE CHINESE HAVE ALREADY PAID. e.g. So if WISCO has paid x for half, the whole is worth twice x.

Assuming FIRB approval, WISCO will pay the following for a 60% share of magnetite in ELs 3611, 3421, 3269, 3731 and 3877:

CXM will receive A$52m on FIRB approval (deposit of A$500,000 already received), and another A$26m in a year.

CXM will also receive A$75m from WISCO to cover work commitments such as drilling, exploration study etc.

This is a total of A$153m for a 60% share. This infers a total value of:

A$255m.

There are further payments based on the hitting of large JORC targets. I will ignore these to be conservative.

Also, CXM will receive A$10.09m for the issue of 40m shares to WISCO.


BAOSTEEL BUNGALOW JV:

For a 50% share in this JV, Baosteel will give CXM:

- A$8m on settlement and FIRB approval (for a 10% share)
- A$8m on achievement of stage 2 (another 10%)
- A A$24m if JV proceeds to a BFS (for another 30%)

Plus, CXM will be reimbursed $2.27m for prior expenses.

This infers a value of A$82m for the whole asset.

A$82m


CASH

At the last Qtr report, CXM had A$7.5m in cash.

They have a mcap of 273m shares (fully diluted), and then add another 40m to be issued to WISCO. Total shares 313m.

So fully diluted mcap of A$188m

Assets

Cash $7.5m
Cash from Issue to WISCO $10m
Wilgerup DSO $143m
WISCO JV A$255m
Baosteel JV $82m

Total Value - A$497.5m. 313m shares.

Total value per share A$1.59

No value for any other tenements.
No value for WISCO JORC target top-ups.
No assumption of the iron ore price increasing.
No value given for the WISCO credit assistance.
No further DSO resources increases either.

CXM is a very cheap iron ore play. And the announcements which will fast-track these developments are imminent.

Y