Founder and Executive Co-Chairman, Ivanhoe Energy Inc. Age: 62 Source of Wealth: mining, self-made Residence: Singapore, Singapore Country of Citizenship: United States Education: Bachelor of Arts / Science, Reed College Marital Status: Married Children: 3
follow on from poster gunss -very interesting calculations
I ran a Discounted Cash Flow, (DCF) analysis of just the company's initial project with the 20 million lbs of uranium, (of 90 million total lbs of uranium). The Net Present Value Per Share at a conservative 12% discount factor, assuming 10% higher operating costs, ($33 vs. $30) and 25% higher project cap-ex, ($100 million vs. $80 million), first production in 2016, $65 long-term uranium prices, an 8-yr project life at 2 million tons per year, is 2.25 cents per fully diluted share.
I assume that half of the $100 million of upfront capital is from newly issued shares and half from project-level debt or joint venture investments. In other words, more than 3 billion fully diluted shares. Don't be alarmed, the economics still work well.
Being a little less conservative, assuming a 10% discount factor (instead of 12%) and a $70 long-term uranium (instead of $65), the NPV is 3.35 cents per fully diluted share.
So, conservatively 2.25-3.35 cents per fully diluted share for the initial 20 million lb project alone, meaning that investors get a FREE option on the other 70 million lbs of identified uranium PLUS a FREE option on the 50% of Ablation Technologies that Black Range owns.
How much could the Ablation stake be worth? Assuming a 5% gross revenues royalty on the use of the Ablation, 5 million lbs of uranium produced per year by third parties using Ablation, a $65 per lb uranium price, that would be $8 million of income per year for Black Range's 50% stake. An $8 million annuity at 8% is worth $101.5 million, (undiscounted, Black Range's share).
Discount that cashflow 5 years (to reach the assumed 5 million lbs run-rate) at a conservative 12%, that's $57.6 million, which is an incremental 1.7 cents per fully diluted share, on top of the 2.25-3.35 cents per share.
Therefore, I think Black Range could be worth 4-6 cents per fully diluted share in the next 3-6 months if the company executes on its key initiatives.
While this may seem like pie-in-the sky numbers, if the Ablation technology can be successfully scaled, a lot more than 5 million lbs of uranium production could be amenable to Ablation and since the annuity-like income stream would be long lasting, 100% of the inevitable increase in uranium prices would accrue to Black Range Minerals.
If one believes like I do that the fundamental floor valuation for Black Range is probably 2.0-3.0 cents per share, then the FREE option on the rest of the upside is worth a shot. The FREE option only runs out when the company runs out of cash. But, they just took in $3 million of fresh capital.
BLR Price at posting:
1.8¢ Sentiment: Buy Disclosure: Held
