Stonkmaster;I've had a look through this model now. It is really...

Stonkmaster;

I've had a look through this model now. It is really good so well done.

I just have a few comments, they may be wrong, as i can see the numbers but not the formulas with the link.

So apologies in advance if i have some of this wrong.

1: Onslow Mining services, (I presume that's the Onslow TMM, you are running it at 32, 37, 38, 39), or about 155 per annum at full run rate. I think Mins forecast this at about $280 m per annum;

2: The prepayment of iron ore, should that be a negative rather than positive in the model?, as they gradually repay the pre payment by delivering iron ore, no cash comes in

3: The road trust earnings are running at about 160m per year in your model, and a 51% share would be 80m, They have an 8.27 charge at 35 m tonnes = $289 m * 51% = $147 m pa. Just check your numbers are right.

4: The depreciation is interesting. In all my models i replace it with a long run sustaining cap ex number to try and get a cash flow based P/E rather than an accountingn one. I was running same as you at $250 m, but now they are forecasting Onslow at $87 m per year, and mining services seems to need very little sustaining cap ex.
I really don't know what to do here myself, as $250 m per year of sustaining cap ex feels reasonable, but if their numbers are to be believed, the actual number could be $150 m per year or lower.
In the first few years with all the Onslow equipment brand new the sustaining cap ex could be quite low and then gradually increase. But the actual depreciation charge will be high, probably a lot more than $250 m, as they want to minimise tax.

5: The deferred tax asset issue is interesting, and what's the effective tax rate? On the last conference call Mark Wilson said assume 100% conversion of EBITDA to cash as a starting point. I wasn't sure if he was referring to a pre or post tax number, and implying they have so much losses, and very high depreciation running off Onslow, that they don't expect to pay much tax next year. Its probably something to check with the company, the expected tax rate for next year. Estimating the effective tax rate year to year is a nightmare.
My guess is running the effective tax rate at 30% in your model after q1 would be too high, but also does give a better feel for the normalised P/E.

6: I'd probably have the interest costs coming off about $4 m per quarter from Q3 onwards as they pay off the revolver and probably get the $200 m MS payment in q2, but they may start a little higher aswell, so the overall estimate of $436 m looks fine.

Lower and upper bound P/E are fine, but note there are upside "free" options with Lithium if we ever get a price rebound, though i know it looks terrible now. The cure for low prices is always low prices causing high cost supply to leave.

The more immediate upside option is expansion of Onslow from 35 m to 50 m tonnes, which is big.
I think the market will begin valuing this 2nd option in about 6 to 9 months time, when the debt is coming down, and the run rate is 35 m t +, which would then probably justify a trading P/E closer to 10 than 6.

I think we are pretty close all up. My fair value right now is about $45 per share, but i admit that also puts very little value on the upside options which are very difficult to actually value.

Thanks for sharing your model, and cheers, I hope these comments help;

Dekka.