rio will seek to negotiate a joint venture, page-31

Hi lord e,

IMO your sums are reasonable but there are an awful lot of assumptions in there.

The main one is the form of the JV, which we have no idea of at this stage. A 50:50 profit split is a rather big assumption - also very hard to get a handle on the costs. There will be more upfront CAPEX to build the pit... but once it's up & running mining costs (at least for the shallower zone 1) may be much less than they currently are for Rossing. Higher grades may also mean considerably lower processing costs/lb.

A further complication is that these are not earnings that are available now but will be at some point in the future, so an "opportunity cost" discount has to be applied to any P/E calculation. If we were looking at something that will be earning in 2 years time, rather than now, I'd guess that a P/E of 4-6 would be in the right ballpark. Concrete, reported profits are valued differently to anticipated future profits. Saying all of that, sometimes there is no fathoming the P/E Mr Market chooses to put on some companies (eg I am short a UK carpet retailer that is on a 2009 & 2010 P/E of more than 20! I somehow doubt that rating will last, though, which is why I'm short - espcially when their bankers come knocking :0))

IMV we can't really second guess the results of a DCF from a feasibility study with any degree of accuracy. That's why consultants are paid $100Ks to do it.

TBH it could be the case that if a JV is confirmed, rather than an offer, the market might get a bit nervous until feasibility study results are published. An offer at a good price would certainly make our life simpler - and I suspect Dattels will think that way too.

ATB,

Mark