The value of assets like Mining Consumables for me is what could they sell it for based on free cash flow in a worst case senario.
I was just wondering what if ARI sold the Mining Consumables business, what would they get for it?
FY15 EBITDA around $200m
Stay in Business Capex (SIB) is 50% of DA = $50m
Cash flow after SIB capex = $175m
Say a 10x multiple on cashflow = $1,750m
Anyone who can borrow less than 10% makes a cash profit on the difference. Excluding a control and future earnings premium. So a worst case scenario for the price is $1,750m.
As Arrium is borrowing at 5.3% it has to be sold at a 18x multiple (i.e. 100/5.3%) to have a flat impact on cashflow.
BUT ARI would debt free!
Say Steel isn't worth anything, although this years $227m in steel assets sales suggests otherwise. And also that Steel generates no free cash going forward. Not today's situation or the huge jump in EBITDA associated with a lower currency in the 80c range. But let's just say...
ARI should be then be valued as a 'debt free' Iron Ore miner at 13Mt which a all in cost base mid to high $70's (ie including stripping 8/t).
*** Cash flow generation ***
Assume Iron Ore = $US94 for the next 4 years audusd 0.93
Cash Flow $AUD 101 - (78) = $23/t * 13Mt * 4yrs = $1,196m
Today Market Cap = $1,202m
That is the only way I get the current share price...
Of course in 4 years time ARI will still be producing Iron Ore at 6-7 Mt (all in cost $65/t ish for 58% grade) if you assume Peculiar Knob only lasts 5 years (very unlikely).
And I haven't even included a value for the port.
I don't understand the share price. It could be double and be still undervalued even with am assumption of today spot iron ore and currency for the next 4 years.
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Last
3.7¢ |
Change
0.000(0.00%) |
Mkt cap ! $28.96M |
Open | High | Low | Value | Volume |
3.6¢ | 3.7¢ | 3.6¢ | $19.65K | 546.0K |
Buyers (Bids)
No. | Vol. | Price($) |
---|---|---|
1 | 309089 | 3.6¢ |
Sellers (Offers)
Price($) | Vol. | No. |
---|---|---|
3.7¢ | 329963 | 3 |
View Market Depth
No. | Vol. | Price($) |
---|---|---|
1 | 309089 | 0.036 |
3 | 2662000 | 0.035 |
3 | 531911 | 0.034 |
3 | 1218212 | 0.033 |
6 | 848986 | 0.032 |
Price($) | Vol. | No. |
---|---|---|
0.037 | 329963 | 3 |
0.038 | 433129 | 1 |
0.039 | 227882 | 3 |
0.040 | 500000 | 2 |
0.041 | 249750 | 1 |
Last trade - 13.17pm 10/07/2025 (20 minute delay) ? |
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