Our NAV for SFZ is $0.70/share. This is based on an NPV for stage 1 production of 1mpta beginning in the March Q FY11 and ramp up to 3mtpa by FY13. Our model is based on a 20 year mine life, however a 150mt resource will support a much longer mine life. We have assumed stage 2 pre-production capital costs of US$130m and cash operating costs of US$24/t (Mining and Crushing: US$3/t, processing: US$6.50/t, Road Rail & Port: US$13.50/t, Royalty: 2%). Equivalent projects in Australia have average cash costs of circa A$35/t. We rate SFZ as a buy; Ponte Verdes plant will be commissioned within weeks and domestic sales will commence shortly after. We forecast stage 1 operating profit to be ~US$30m per annum, with Stage 2 operating profit at $70m per annum. SFZ is trading on very attractive multiples of 3.6x FY12 EBITDA and 1.1x FY14 EBITDA.
SFZ Price at posting:
38.5¢ Sentiment: Buy Disclosure: Held