The "experts" calculated "fair value" in that report very differently to us and I think they were a bit sloppy. They used the "comparable transaction method" (see p43). They looked at the $ paid per t of Fe (non DSO Fe) in recent transactions. They stated that prices paid ranged from $0.3 - $1.30/t and decided that PLV should be valued at between $0.52 - $1.00/t. Their method did not take into account the different infrastructure requirements for projects, ore quality, costs of beneficiation etc. The experts also stated that our project was most similar to the Aurox (sold to Atlas) and Cape Lambert (sold to Chinese) projects. These projects were sold at $0.7 and $0.82 / t respectively. Let's look at those two projects in greater detail:
1. Aurox (AXO): - magnetite resource, requiring beneficiation. - operating costs $36/t -capex $1.0 billion! (includes a 110km, $200 million pipeline to pump a slurry to port). -produces a 58% Fe concentrate (much less than PLVs 67% Fe concentrate) - had access to port capacity at least. More info: http://www.pdc.wa.gov.au/media/34443/aurox%20resources%20balla%20balla%20-%20mark%20hoffman.pdf
Summary: lower grade resource and larger Capex. Large pipeline required that is likely to need lots of development approvals.
2. Cape Lambert Resources (CFE): - sold the Cape Lambert Project - plans to use the Anketell Port development that is yet to be built. - requires Rio Tinto to move their railway line in order to dig the pit! - Hard to find info, but Capex is reported to be $3.7 billion on p19 of this: bree.gov.au/documents/publications/resources/Mining-industry.doc
Summary: All in all, massively expensive project to develop. Hardly surprising it got sold for peanuts as a result of high Capex.
Furthermore, if you look at Table 10 of the "expert" report from pages 39-40, we see that the prices paid for other projects also includes $18.63/t for Territory Resources (TTY) and $4.84/t for Cazaly resources (CAZ) Parker Range assets. Take a look at Cazaly, the "expert" valuation was a bit ordinary. If you dig deeper and you'll see that Cazaly resources ACTUALLY sold it's assets in a deal worth $180 million:
This makes the valuation of their assets worth something more like $9.20 / t.
PLV, on an island, no rail needed, fairly low Capex by comparisson to some others, high grade concentrate attracting a premium price. Is $0.52 - $1.00 / t really fair value? Really???
Stats.
PLV Price at posting:
22.1¢ Sentiment: Buy Disclosure: Held
