research & resulting questions, page-11

Hi Firsova,

I did have a long reply written to your post detailing my value for each of the business operations, however I have decided not to post it for now. I would like some additional time to review my figures, hopefully they will be up in a day or two.

However a quick review of the figures from past announcements could suggest the following:

6 October 09 Announcement:

Australia NP = $5 to $8m (lets just say $6.5m)

USA NP = $20 to $30m based on 150-200 tpa* (lets just say $25m)

Total NP = $31.5m

Conservative PE of 10**

= Value of $315,000,000**

*Please note MHM are now aiming for 200-250 tpa in the USbut im being conservative.

** assumes that the Aust business will be able to run at full capacity even after the landfill has been exhausted

*** obviously that value is based on the signing of a US agreement is yet to happen.

I think an examination of the above shows some pretty good upside for just one side of MHM's business. Given our market cap is only cira $120m we could look at it in a variety of ways/consider the following:

1. Full value may not be being attributed to the Aust operations give the uncertainty over how long the plant will run at full capacity.
2. The potential of the US is probably only priced in by 10-15% as it has the potential to add 300m to our market cap ($30m NP x 10PE). I.e. our current Aust operations assuming we achieve a NP of 6.5m in perpetunity would attribute $65m towards our market cap, leaving $55 m to be split amongst our US & EU potential (say $30 - $40m) silica assets and other exploration targets ($15-25m). Even if you attribute a lower value to the Aust operations and value the US potential at $50 m there is still significant upside once a formal agreement is signed.

The above are very rough figures and as I say I will be conducting proper analysis over the next day or so, however I think it shows that the potential US operations are not being appropriately valued by the market at this stage (Its my opinion that the chance of achieving a US agreement would be higher than 10-15%). Furthermore a value of under $25m for the silica and resource potential is not overly bullish, you could scan the ASX and find a heap of non producing resource companies trading on a MC higher than that.

P.S. thank you for sharing your figures Firsova I look forward to seeing how they compare once I have completed my detail analysis. On face value however I do believe there is value in MHM at current levels.