rio will seek to negotiate a joint venture, page-23

Marben me old cobber,

So a JV with RIO. We have discussed this before but I guess it is time to look at it again.

What sort of money are shareholders likely to make out of a JV?

The grade is so good I can see a cost of production down as low as $12-$15 per pound. RIO is currently achieving about $17-$18 per pound with Rossing and that is with a much lower grade than Rossing South offers. I think I am safe with $12-$15.

I think current contract prices are US$70 per pound even though the spot price has dropped. Is this right? Does anyone know if contract prices have dropped below US$70? If they have it spells trouble for other explorers whose grades are nowhere near EXT's. Think about it.

If it is $70, then that means a profit (if I am right about cost of production) of 70-15 = $55 per pound. I think 8 million pounds per annum is currently produced at Rossing but a higher concentration such as that in Rossing South would increase that production.

Let’s assume it remains at 8 million pounds because I am guessing that Rio will still be producing some Uranium from their own resource.

If it is 8 million lbs p/a then that means 8 x 55 = $440 million per annum PROFIT. NOTE, it is PROFIT not revenue, PROFIT PROFIT PROFIT

How much percentage of the JV would EXT get? I have no idea. Can anyone help? I am open to all suggestions.

Even at 50/50 that means that EXT will profiting roughly $1 per share. Mind you that is not earnings. Earnings would have been 8 x 70 = $560 million.

At 50/50 that means 280/222 eps = 1.26

I don't pretend to be great with this stuff but price/earnings ratio seems to be something the market looks at.

For the scenario I have painted here the price/earnings ratio (at current price of $4.17) would be 4.17/1.26 = 3.3

What is the fair p/e ratio these days? I dunno. Can anyone offer some advice on this? I thought p/e ratios were supposed to be about 10 - 15 for most companies but maybe that has changed in the current climate.

If the fair p/e ratio was 10 then that means a share price of $11.26 but you don't have to sell, you will enjoy fully-franked dividend for the next 30-40 years which should make life quite enjoyable.

If the profit was roughly $1 per share what would the dividend be? Again, I seek assistance with that. Would half of that be paid as a dividend? Is that too much?

So many questions and my little bitty brain can't get all the answers but this much I know to be true.

If you are an investor then right now this is cheap, really cheap. If you are a short term trader it may well pull back next week or it may not, I dunno.