For the benefit of SDL'ers, see Reggie's post back in September...

For the benefit of SDL'ers, see Reggie's post back in September (pre-Noble).

GMP touts itself as "Global Institutional Sales, Trading, and Research in Debt, Convertible, Equity and Asset Back Securities" have priced Sundance (without taking into account non-commercial competitive pressures associated with bids from Soverign nations) valued SDL de-risked (pre-raising) at $1.32 / share.

The interesting thing is this "de-risking" could "potentially" be accomplished in just a matter of weeks if Sundance secures a securely funded infrastrcuture solution with binding offtake contracts and partial (or whole) asset sale like those the Chinese are so keen to broadcast.

So, the billion $$ question is when will the sp starts to fly ?? The FALSE DESTINATION trap must (IMO) be laid optimally and there is a finite window within which retail holders have to be convinved that they should dump their SDL shares as this is is end of the road.

Hmmmm

.....This Broker Report was submitted by GMP Securities in Sept of this year just before the Patterson's one. Interesting read to see they value it at $1.32 if all risk factors are removed.

Biggest DSO in Africa outside majors with appealing
infrastructure agreements: Mbalam-Nabeba hosts
775Mt of DSO (436Mt in reserve), making it the biggest
DSO outside the majors’ Simandou in Guinea and Kumba
in South Africa. Sundance also has a 25-year rail and port
concession, which we think adds to its strategic appeal.
Unlike peers, this allows it to ‘sublet’ the agreement (with
government permission), and use foreign labour in
construction, which should help attract an infrastructure
partner.
Frontrunner in the African “Pilbara”: Mbalam-Nabeba
and nearby discoveries host over 2.0Bt of DSO. Given
this (i) is not controlled by majors, (ii) and already large
enough to support >60Mtpa, we think it’s one of the last
regions that could allow new entrants substantial supply.
Sundance is arguably best placed in the region over more
logistically challenged Avima and Belinga.
New investor remains key: While the deposit and region
are fundamentally outstanding and of strategic
importance, markets are more capital constrained now
than when the Hanlong bid was launched. As such,
interest from other strategics in the next six months
remains critical to unlocking the per share value.
Transferring coverage with a SPECULATIVE BUY and
A$0.20 PT. Our valuation is based on 0.15xNAV10% with
US$120/t iron ore price assumption. Ahead of an
infrastructure partner being selected, we conservatively
model first production in 2019 with a two year ramp-up to
35Mtpa. However, management is targeting 2017 with a
one year ramp-up which could materially improve our
NAV. The stock trades at 0.06xNAV, although we think the
project is worth significantly more to potential partners.


INVESTMENT SUMMARY
Largest undeveloped DSO project, second only to Simandou…
Sundance has a first mover advantage, having pegged, drilled and scoped one of the largest ironstone outcrops in Africa. In terms of size, Mbalam-Nabeba ranks as the biggest undeveloped DSO project in Africa outside the majors, and is second only to Simandou. Unlike many West and Central African peers, the deposit is build-ready with a full feasibility study, rail concession, mining convention and export agreements (for Republic of Congo) in place, and equally as important, is of DSO grade.
…with rail and port concessions offering full integration
We view the government’s willingness to agree to let Sundance have first right of refusal on operatorship of rail and port as a key differentiator beyond the quality of the underlying asset. Many deposits in Africa need rail, but concessions are controlled by either inefficient parastatal operators or structured in a way that governments take majority ownership. For any potentially interested rail operator, complete control combined with the ability to sell allocation to other nearby parties such as Core Mining and Afferro should make this an exciting business proposition in its own right, given the aggregate tonnage. We think this is a key point when critically evaluating the likelihood of a strategic investor stepping up.
Ability to use specialist foreign labour is also a key positive
We understand Sundance’s mining concession in Cameroon (where most capex will be invested) has no labour restrictions with respect to the mine and infrastructure build. In our view, the ability to use specialist foreign labour is a critical requirement for many strategic investors. For example, Chinese SOEs typically prefer to use their own labour force, which can actually be a restriction in them achieving export-credit style state funding.
Frontrunner in potentially the next Pilbara
The surrounding area to Mbalam-Nabeba already hosts more than 2.0Bt of DSO, enough in our view to justify the region’s infrastructure requirement, and to comfortably support well over 60Mtpa. Although nearly every iron ore discovery in West and Central Africa has come from exploring areas with noticeable topographical relief, we do think substantially more DSO is likely to exist in the surrounding areas, taking the regional potential to >5Bt. In our view, Sundance is a c
lear frontrunner in this region, ahead of Avima in ROC (further from rail) and Belinga in Gabon (closer to coast but major rivers to cross and shallow port).
Hanlong overhang largely immaterial compared to finding new strategic
Hanlong continues to hold 434m shares or 14.3% of Sundance, which, following the bid termination, is perceived by some as overhang. That said, we believe uncertainty in capital availability is the key price driver. As such, we view the Hanlong overhang as largely immaterial compared to finding a new strategic to drive the project forward. While closure on financing isn’t imminent, we certainly think discussions with steel mills, traders and other iron ore users should confirm interest in the next six to nine months.

VALUATION
We value Sundance on a DCF basis with a 10% discount and US$120/t assumption for 62% fines CIF China. Adding cash and corporate overheads including 8% debit interest on negative cash balances gives 1.0xNAV of A$1.32/sh.
Stage 1 DSO
We model Stage 1 DSO based on existing reserves, which supports a 12-year mine life but importantly leaves plenty of scope for further resource to reserve conversion and thus real potential for the DSO operation’s mine life to extend well beyond this.
With regards to first production, we conservatively model 2019, which implies four years to (i) find a strategic, (ii) structure JV/earn-in, (iii) finance, and (iv) build the project. In our view, Sundance could well achieve this beforehand but we feel at this stage it is simply too difficult to speculate on a definitive timetable.
DSO (>55% Fe)O/shipDSO (Mt)Fe (%)SiO2 (%)Al2O3 (%)Subsidiary resourceValuationValuation timingSimandou (Rio/Chinalco)51/49650kmNo2,25465.7---US$3bnChinalco US$1.35bn for 45%Simandou (Vale/BSG)51/49650kmNo-----US$5bnVale US$2.5bn for 51%Sishen1 (Kumba)73.9860kmYes2,15259.1---US$14bnMarket cap (43Mtpa prod'n)Mbalam (Sundance)81-76.52580km3No77557.29.24.44.0Bt @ 38% FeUS$236mMarket capKhumani (Assmang)50860kmYes72765.04.41.45--Private (10Mtpa prod'n)Mt Avima (Core)100550kmNo69058.010.23.81.6Bt @ 36% Fe-PrivateNimba (Newmont/BHP)43.5/43.5300kmYes679464.34.690.95123Mt @ 45.3% Fe--Belinga (Chinese/BHP)-450kmNo566562.0---US$3.5bnBHP rumoured bidM'Haoudat (SNIM)100700kmYes15560-68--531Mt @ 38%Fe-PrivateTonkolili (African Minerals)75170kmYes126.558.12.461.1Bt @ 40% FeUS$1.0bnMarket capNimba (Sable)80310kmYes612158.05.54.7Kpo: 13Bt target81.83444397Current market capKalia (Bellzone)50286kmNo8854.14.65.6823Mt @ 37% FeUS$49m50% of market capMayoko (Exxaro)80465kmRefurb.4454.911.84120Mt @ 46% FeUS$360m1Q12 takeover by ExxaroNkout (Affero)100300kmNo1960.33.93.09265Mt @ 36 FeUS$135mMarket capTelimele (Nemex Res.)85135kmPart1755.12.49.05258Mt @ 37% FeUS$1mMarket capForecariah (Bellzone)5077kmNo355.88.26.671Mt @ 35% FeUS$49m50% of market capbDSO / oxide (35-55% Fe)Tonkolili (African Minerals)75170kmYes11244021.411.212.4Bt @ 29.3% Fe-Subsidiary to DSOKalia (Bellzone)50286kmNo82336.818.715.04.6Bt @ 26% Fe-Subsidiary to DSOAbja (Kogi Iron)75500kmPart48835.422.014.5-US$27mMarket capNkout (Affero)100300kmNo26536.137.05.852.2Bt @ 30.7% Fe-Subsidiary to DSOTelimele (Nemex Res.)85135kmPart25837.299.221.1--Subsidiary to DSOMayoko (Equatorial)100465kmRefurb.10243.929.26.7665Mt @ 31% FeUS$69mMarket capForecariah (Bellzone)5077kmNo71.134.72216.1161Mt @ 24% Fe-Subsidiary to DSOMofe Creek (Tawana)10020kmNoGMPe target 100Mt @ 40-50% FeUS$13mMarket capBHP (group)Rio Tinto (group)Vale (group)Hancock Prospecting998Mt @ 59.6% reserve in Australia, 2.2Bt @ 56.8% resource in AustraliaFortescue Mining(1) Includes Thamazimbi, Sishen and Kolomela, (2) Cameroon and ROC ownership, respectively, (3) 510km to Mbarga, plus 70km to Mt Nabeba, (4) Euronimba marketing materials, (5) Marene 1970, Porter Geoscience, (6) 267km existing, 17km being refurbished, 37km to licence with no rail, (8) 3.8Bt of 15.2Bt in Canada / Guinea7.9Bt @ 56.8% resource in Australia15.1Bt @ 56.4% total reserve in BrazilRail, existing?3.4Bt @ 62.4% reserve in production, 18.1Bt @ 59.3% Fe undevelped Australian DSO2.8Bt @ 62.8% reserve in production, 16.0Bt @ 57.1% Fe undeveloped mainly Australian8 DSO
September 4, 2013
5
The DFS was completed in 2011, so capex numbers are likely to be slightly out-ofdate,
in our view. Management is re-tendering EPC contracts in the coming quarters
and thus should provide up-to-date capex/opex figures. With build not set to start until
2014 at the earliest, we model 10% escalation to factor for any capex creep. We
model Stage 1 DSO using our LT iron price of US$120/t for 62% fines CIF China
together with a 10% discount rate which drives our 1.0xNAV project valuation of
US$3.8bn or A$1.36/sh.