I have read through the last thread, which is zero informative of anything this company is doing, its just a bunch of blokes having a winge about the value of the share price, manipulation of the share price, the effect of the recent consolidation and then to top it off, calling and wasting managements time with these issues.
Now lets talk about the recently completed Pre-Feasibility study on the Jambreiro, and the outstanding results received from this study.
The company is focusing on a start up at this project of 2mtpa (minimum), nothing huge, but what is really positive is the low CAPEX and OPEX figures, allowing this project to pay itself off within a year (this is very rare for Fe projects).
The total CAPEX figure is just under $132m, and an OPEX of $19.90 Considering the grade of Iron ore is 28.5% Fe at Jamberiro, the company will be using a benification process to push out a final grade of 66% Fe. So a OPEX figure of $19.90 is amazing.
(Note: SDL's DSO project predicted at just over $20/t, with no benification process) (Note: Magnetite producer GRR, process their product to 69% Fe and OPEX is $110-120)
Now the company has used a sales price of only $73 in their assumptions (mine gate sale): Now i don't know how much of a discount is giving because it will be a mine gate sale, and a domestic sale, but currently the price of Brazilan Iron Ore Fines at 66% Fe is $176 (and $188 for pallets) Source: http://scrapmetalsandplastics.com/IRONORREWORLDPIRCESTOCHINA.aspx
So at Todays iron ore prices CTM effectively has about $156/t profit margin x 2mtpa = $312mp/a. Long term prices are predicted to be lower than current prices, but iron ore prices have taken a dive in the last few months hitting under $120/t for 62% Fe product, (which coincidentally is some brokers long term iron ore price).
The $73 used by CTM for its 66% Fe product, would value the 62% Fe products at about $50/t which is about half the price of what many expect the iron ore price to be years down the track.
Discounts for Mine gate sales and domestic sales must have been taken into consideration when making the price assumption, and even with these assumption taken into account, i do believe that the sales price would still be substantially more than the $73 in the Pre-Feasibility study.
So we have a huge tick under Commodity price risk, by being such a low cost producer (in the future) it can be expected that this company can still make money when others start to struggle (if Fe prices fall hard).
CAPEX costs are very low because of the limited amount of infrastructure needed by CTM, most of the infustructre already exists around them, and close to half of the CAPEX is physical equipment items. Another big tick. The low CAPEX makes this one of the least riskiest Iron Ore projects on the ASX.
Another advantage is that this project is expected to come into production in 2 years (Q4 2013), alot sooner than other prospective new entrants into the iron ore market.
2mtpa x ($73-$20) = $106m profit if EPS is $100m there is a good chance that the market cap will be multiples of this.
Remember these guys are following the rapid growth strategy of Atlas Iron, who is now a major shareholder with over $400m in cash and no debt. With the low CAPEX required to start up CTMs first project, i wouldn't be looking far if i were CTM to fund this project, and im sure AGO would like a slice of a project outside the Pilbara.
The major risk of CTM getting this project, and others upto production stage is AGO coming along and taking over CTM after it has done the hard work (finding resource, establishing feasibility of projects, identifying markets and executing contracts) and AGO will swoop and take care of funding and make the projects happen.
Just to touch on share price again, for those who aren't interested in the fundamentals of the company.
We are currently in a pathetic turbulent market, most companies are down from where they were, consolidation or not.
Brokers targets are just that, targets, they are not current prices, and if they were current prices brokers would not be recommending a BUY because the company would be fairly valued and not worth buying.
The closer the company comes to production the more fairly valued the share price will be, currently the company will be looking to complete LOI's from domestic consumers as well as exploration of other projects, looking for other 'near term' production assets, and most importantly getting 'Environmental and Department of mine' approvals for ALL projects.
As the company achieves these things the share price should reflect the increase in company asset (successful exploration) and the de-risking of projects (LOIs and approvals)
Regards,
CTM Price at posting:
61.5¢ Sentiment: LT Buy Disclosure: Held
(20min delay)