potash junior stocks, page-20

hi JR

i still cannot grasp what NPV fully means. however, my numbers get a similar NPV (after tax)

at $450/t potash and $124/t opex, i get NPV of $1.33b at 10% discount, $914m at 12% discount and zero at 20% discount

ELM holds 93% of the project. if they were 25% free carried & the JV partner financed the project with 50% debt, i get 29 cents EPS to ELM. if the JV partner fully financed the debt out of cash (eg. Vale), i get 33 cents EPS to ELM

if ELM held 93% of the project and borrowed 60% of $1.8b to run the project themselves, raising 40% of capital at $1.25, i get 35 cents EPS. on a PE ratio x 10, investors would acheive a return of 177%

in my naive models, i like to use a 200% return for investors. with that scenario, at $450/t potash, capital raising at 94 cents can bring a 200% return, with a EPS of 28 cents

when ELM peaked, i suppose the market was thinking of $550/t potash.

at $550/t potash, funds can be raised at $2.55 for a 200% return, with EPS of 76 cents

similarly, at $550/t potash, the 25% JV scenarios would return 40 and 45 cents EPS to ELM

so in the near term, at an $450/t potash assumption, i personally cannot see ELM reaching $2.80 but i can see it reaching $2.80 in the longer term

keep in mind, ELM has some large Canadian investors on its registers who paid $1.25 so they will be trying hard to get the project to start

regards