quick tty evaluation

Hi All,
Since some people are posting some evaluation analysis on TTY. I thought I might give it a crack using a comparative P/E model based on EBIT.

So, according to TTY management they are expecting to produce 2.5Mt of iron ore next year. Which, at current iron prices produces revenue for full year 2009 of $262.5 million. (i.e.$105 X 2,500,000).

Also, since management is indicating that it should reduce cost per tonne mined down to $60 (please read today’s announcement regarding diggers and dealers conference). We can produce a rough mining operations profit forecast of $112.5 million dollars before tax. And if we add administration costs of roughly $16 million dollars a year (see current quarterly activities report), we arrive at an EBIT figure of $96.5 million dollars for full year 2009.
Which equates to EPS of $0.36 ($96.5 million/264,606,338).
And if you times this figure by the average P/E of the mining sector of 12.91 (according to comsec), you derive a share price value of $4.70.

However, as one pervious poster has commented the life value of the mine is currently pegged at 4-5 years, which as you would expect would lower the estimated value of TTY to a specific discount factor. However, if managements prediction of expanding the mines life by discovering 20mt at its frances creek mine are realised, this would have a major revaluing of the current share price to the upside, as you would expect production per annum and the mine life to increase per year.

Don’t forget the above analysis is before tax and any exploration expenses, which would obviously lower the earnings and therefore the EPS rate the company achieves.

What do you guys think?
P.S. I hold