real value, page-6

Sigh... technical issues with the HC site means this is my second attempt to post a reply to thinice - sorry for the delay.

Thinice, thank you for your reply. Yes, I think you are correct when you say: "...shouldn't $500m be subtracted off the project valuation as half the capex has been raised through equity...". I was trying to avoid being too specific about how the capex was being raised, but since capex is a big part perhaps that was too simplistic.

I'll assume a 50:50 debt:equity raising. The debt by long term bonds issued at 10% (effectively an interest only loan) and the equity raising by issuing 50m shares at a price of US$10 each. Fairly simplistic assumptions, hopefully ballpark and conservative. The end result is an increase of about A$1 per EXT share.

I've also had a stab at estimating depreciation and amortisation costs. WH Ireland had a research report which estimated these costs as US$37.5m in 2015-17, rising to US$46.4m from 2018 onwards. I picked an approximate middle value of US$40m. The end result is a decrease of about A$1 per share.

It seems odd that the two should counter each other almost exactly - I put that down to coincidence.

All in US$ unless otherwise noted
U price: $70 per pound (long term price)
Production Mlb pa: 15
Sales: $1,050m
Costs @ $25 per pound: $375m
EBITDA: $675m
Depreciation and Amortisation: $40m
Interest on debt raising: $50m
EBT: $585m
Tax @ 37.5%: $219m
Earnings: $366m
Project valuation @ 10 times profit: $3,656m
Capex equity raising: $500m
EXT valuation: $3,156m
Exchange rate: $0.85 (long term exchange rate)
EXT valuation: A$3,713m
Number of shares: 300m (after dilution from capex raising)
EXT share price: A$12.38

Effect of:

Production increases to 16.5Mlb pa (+10%): +21%
U price increase US$5/lb (+7%): +15%
Opex increase US$5/lb (+20%): -15%
Exchange rate increase $0.05 (+6%): -6%
Capex increase US$100m* (+10%): -2.6%
*50:50 debt:equity, no change in D & A

Note that the EXT share price is leveraged to changes in production increases and the U price, at about 2:1 (ie a 1% change in either of these inputs results in a 2% change to the EXT share price). Changes in opex and exchange rate are about 1:1. Changes in capex have the least effect, at about 1:4 (ie a change in capex of 4% results in a 1% change to the EXT share price).

The current rise in U price is very, very good for EXT.