nkp summary

Looking at the NKP numbers carefully and going over them with my mate there are a few points that I thought I can contribute.

The NPV of $AUD832m by itself basing on an $AUD640m CAPEX is marginal. Since its just Marensky Reef and UG2 are not factored in, however UG2 would likely only commence after 5-6 years would not add too much to the overall NPV. Probably see the NPV to be $1-$1.1billion. The IRR of 18.7% does not look too flashy but if you factor in UG2 then 280-30% is more likely. Even at 30% this is a good project but I would not consider this as “exceptional”. A mining project with an IRR of >45% I would consider as exceptional.

What I found disappointing is that in the Quarterly the production was to be around 420k oz while this one shows that the production is 330k oz. At a margin of $500 this would represent another $45m to the bottom line. I am sure a NPV and IRR under the same CAPEX but 420k oz production, and I assume the costs would be further lowered, would look a hell lot better.

Considering that many platinum producers are shutting down at the moment you can say that NKP project is profitable. This is one good news. I do see that this project would be on the lower end cost curve compared to its peers who are mining at costs of $1100 (mid end producers)-$1400 per oz (high end producers).

On the fact that DRA received 23m shares for its services in the past 18 months. This I had to run by my mate who knows the mining industry a lot more than me and has done off-take deals in South Africa. I am told that a full BFS would take about 2 years to complete and can cost up to $15-$40m depending on the size of the project. Usually the players that undertake BFS are larger scale projects. NKP BFS would have cost in the region of $15-$20m. NKP did conduct a BFS since 2009 and you guys can check the Quarterly Spending during this time to see that $15-$20m range would have been about right.

However this is an “optimised” BFS which means that that there would be a lot of data that will already is available. My mate said if the BFS itself cost in the region of $15-20m then the optimised version would most likely be 1/3 of this if it did indeed take 18 months to complete. So the DRA fee I assume would be$5-$6.6m equivalent in cash. This means that the shares for services would be 21.7c- 29c. So a mid-point guess would be 25.35c. This range is consistent with the 30c that the DRA is subscribing for. However the DRA willing to take scrip and subscribing for more shares places a lot of goodwill. DRA now has 5% of NKP so they are a substantial shareholder now.

I don’t think that the NKP share price will hit 30c or go over 30c immediately tomorrow. I have seen small placements to strategic partners (my mate told me PLV and WFE are 2 recent ones) done but the share price trades at like 60-70% of this placement price. I do think that as NKP gets closer to a sealed JV the share price will firm towards 30c or even higher, and once the JV is sealed then it can motor to the 50-70c+ range that was witnessed back in late 2010 before the Court Cases hit.

I can understand that there are those who are not really backing the numbers but also understand those that are barracking for NKP. Summary is that the project is ok and feasible but not raving hot.

Peter Landau may be telling shareholders like 3 weeks for a Joint Venture, I would take his word with much caution knowing his history. Also the terms of the Joint Venture is the most important. I will let the speculations to others.

Good Luck to all shareholders.