research report out-mt bevan re-rating soon, page-38

Hi (Quennevais ),

"Now that still gives me 25 cents per share for HAW which is a huge difference from what Bigstar is talking about...

Bigstar I would welcome the cents per tonne figure that you are using (though I note that as you are applying NPV this is unlikely to be in-ground) and also confirmation that your JORC figure relates to HAW`s likely 40% of the western BIF only-which is the most I see as realistically being JORC`d before a deal is done."

Similar to SDL valuation, all my projections are always conservative, and as I said for Mt Bevan, HAW has got more upside considering the increase in exploration target of 1.5-2b tonnes of magnetite and also there might find DSO that will potentially change my modeling (upwards) as Capex and cash cost for magnetite are always higher than DSO.

From my previous post I mentioned there could be around JORC of 1.7b tonnes of magnetite, however to stay on conservative side, I made the assumptions that HAW has JORC of 1.1 - 1.3b tonnes of magnetite, also considering there'll be of little dilution as Mt Bevan is a fully funded project over 2 years (JV partner with LCY).

Your 25 cts mark are not far off from my EV model :

HAW with 40% stake in Mt Bevan project

Using DCF models

Considering 8% of discount, NPV per share = 6 cts

Note that an increase in share registry, say with a total of 2 billion shares, would have an SP = $0.05

Using full equity with no taxes (JMS model), the estimates capex of $1,582m will require 26,367 millions shares.
In that scenario, NPV @ 8% per share = 4 cts , considering a total shares on issue = 28,143m


Using EV models

I used to take Ambrian (March 2010 publication) as a reference for the valuation metrics for Iron Ore Companies (US$/t Fe):

Assumptions:
HAW with 40% stake in Mt Bevan project
# shares = 1,776 millions

For Pre-feasibility - JORC scoping study

Case 1: US$0.53/t total resource
750,000,000 tonnes = 9 cents
1,000,000,000 tonnes = 12 cents
1,250,000,000 tonnes = 15 cents
1,500,000,000 tonnes = 18 cents

Case 2: US$0.94/t M&I resources (measured and indicated)
750,000,000 tonnes = 16 cents
1,000,000,000 tonnes = 21 cents
1,250,000,000 tonnes = 26 cents
1,500,000,000 tonnes = 32 cents (**)

(**) Taking the last example of 1.5 billion tonnes and assume we have an increase of 1 billions of shares on issues, making a total of 2,776 millions, in that case we have SP = 20 cents

Cheers,