SLX valuations

I promised to provide an update on my valuations for SLX based upon nett present value (NPV),  I have also done it on the basis of EPS with a P/E ratio of 10.  Please do not place too much value on my guestimates - they are based on lots of assumptions and approximations which are almost certainly wrong.  I also may have made a typo or an incorrect assumption - please treat them as my musing, DYOR and take them with a large pinch of salt.

I have made the assumption that SLX ends up with 51% of GLE, that the current royalty arrangement is preserved and that SLX/GLE only gets one project (Paducah tails) and all other development (i.e waste processing, Wilmington etc) is NOT valued.  As I see it if  SLX/GLE does proceed with Paducah tails then it is in the box seat for a lot more but it has to survive to this stage.   The difficult period will be financing the pre-development work for Paducah and making a success of phase II and eventually (~2024) Phase III with operational running of Paducah.  In terms of Technology Readiness Level Silex appears to be at about TRL level 5 right now (I disagree with the DoE (Pg 35 of Tritium & Enriched Uranium Plan to 2060 that GLE are at TRL 3).   The objectives are to get to TRL 6 by ~2021 (this is phase II) and with the completion of Paducah tails project TRL 8 by ~2024.

Based upon these objectives and with the assumptions provided below I calculate SLX fair value to be (on both NPV and EPS basis @ P/E 10 to be:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7
0	SLX Share Value estimates (A$)
1	SLX royalty	7%	8%	9%	10%	11%	12%
2	NPV share value (SLX only)	$0.90	$1.00	$1.11	$1.22	$1.33	$1.44
3	NPV share value (GLE only)	$1.00	$0.95	$0.91	$0.87	$0.83	$0.79
4	Combined NPV fair value share price	$1.90	$1.95	$2.02	$2.09	$2.16	$2.23
5	Fair Share Price (on average EPS)
6	P/E multiple for EPS	10
7	EPS share value (SLX only)	$0.62		$0.84	$0.94	$1.05	$1.16
8	EPS share value (GLE only)	$2.16	$2.20	$2.25	$2.29	$2.34	$2.38
9	Combined EPS share price @ P/E multiple	$2.78	$2.20	$3.09	$3.23	$3.39	$3.54

Assumptions are:
SLX position

	Column 1	Column 2
0	SLX current Market Cap	$92,070,000
1	Current Share Price	$0.54
2	No of SLX shares	170,500,000

Exchange Rates

	Column 1	Column 2
0	Date	17-Dec-17
1	US$/A$	0.76
2	GBP/A$	0.57

GLE position after re-structure

	Column 1	Column 2	Column 3	Column 4
0	After re-structure assumed GLE shareholdings	Cameco	SLX	Newco
1	Shareholding in GLE after restructure	24%	51%	25%
2	Assumed re-structure date (after government approvals)	1-Jan-19

SLX financial position from ann rpts

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Financial Year	2016/17	2015/16	2014/15	2013/14
1	Research and development materials (A$)	$207,498	$60,107	$154,296	$560,854
2	SLX Employee benefits expense (A$)	$3,676,747	$3,091,636	$4,017,953	$5,552,858
3	GLE Development reimbursement (A$)	$6,668,102	$2,550,261	Previously paid by GLE
4	Additional contingent liability under PSA (pro-rate to 31/12/2017)	$2,368,421
5	Consultants and professional fees	$914,782	$951,041	$642,304	$817,515
6	Printing, postage, freight, stationery and communications	$72,897	$99,574	$117,893	Comms in other
7	Rent, utilities and property outgoings	$411,461	$433,766	$474,107	$473,459
8	Net foreign exchange losses	$155,223	$143,418		$37,665
9	Other expenses from continuing activities	$383,912	$429,193	$595,775	$762,300
10	Total	$14,859,043	$7,758,996	$6,002,328	$8,204,651

SLX consolidated Cash Flow

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6
0	Year	2016/17	2015/16	2014/15	2013/14	2012/13
1	Payments to supplier & employees (GST incl)	$13,496,091	$13,157,109	$13,835,072	$24,718,382	$28,773,788
2	Less est GST rebate	-$95,382	-$97,797	-$92,967	-$122,006	$163,328
3	Director/KMP remuneration (2016 & 2017 rem rpts)	$1,670,445	$1,189,684	$2,151,205	$2,344,553
4	Expenses from cash flow (above)	$5,515,628	$5,822,520	$5,208,735	$6,002,328	$8,204,651
5	Overhead	$6,214,637	$6,047,108	$6,382,165	$32,943,257	$37,141,767
6	Recurring expenses (less GST)	$13,496,091	$13,157,109	$13,835,072	$24,718,382	$28,773,788
7	Bank Interest rate received	2.65%
8	Interest 1/7/16 to 30/6/17	$1,449,905

Extra-ordinary 2018 expenditure

	Column 1	Column 2
0		2018  est.
1	PSA contingent payment - pro rata US$1.125m for 15 mnths to 24 months (note 5 (i))	$2,368,421
2	GLE Dev expense for Jul - Dec 2017 - note 7	$6,500,000
3	Total	$8,868,421

	Column 1	Column 2	Column 3	Column 4
0	Expected Term Payments	US$	A$	Exp. Date
1	Engineering tranche 2 payment	$5,000,000	6,578,947	1-Jan-21
2	Paducah tranche 3 payment	$15,000,000	19,736,842	1-Jul-21
3	Expected Newco welcome payment	$15,000,000	19,736,842	1-Jan-19
4	IQE payment	$5,000,000	$6,578,947.37	1-Apr-18

	Column 1	Column 2	Column 3
0	Realizable Assets	30-Jun	17-Dec
1	No of IQE shares	6,113,029	6,113,029
2	IQE share price	£0.175	£1.4811
3	Value (A$)	$1,876,807	$15,884,223
4	Cash at Bank (30/06/2017) - less current liabilities	$40,199,069

	Column 1	Column 2
0	IQE Revenue (Edison Research) 2018	£140,241,000
1	IQE Revenue A$)	$246,036,842
2	IQE growth	2.36%
3	% cREO products of total	10%
4	cREO growth rate to 2018 to 2022	10%
5	IQE cREO royalty rate (average)	3.0%

	Column 1	Column 2	Column 3	Column 4
0	Uranum prices/cost	US$/kg	A$/Kg	Ref
1	UF6 price (US$)	$62.08	$82	UXC price
2	UF6 Tails costs (US$/kg)	$1.70	$2.24	DoE
3	SWU price (US$/SWU)	$39	US$/SWU	UXC price

	Column 1	Column 2	Column 3
0	Paducah Tails
1	Puducah tails tonnes/year	7,500,000	Kg/yr
2	Paducah tails cost (A$)	$5,007,860	/year

	Column 1	Column 2	Column 3
0	Paducah Revenue/costs	Amount (A$)	Unit
1	Paducah full year revenue	$240,625,347	/year
2	SLX royalty income from Paducah (@7%)	$16,843,774	/year

	Column 1	Column 2	Column 3
0	DCF parameters
1	Life of Paducah Project	40	yrs
2	Discount rate	8.50%	Discount factor (same as PDN)
3	Dividend payout ratio	0.00%
4	Paducah on/off	1	1 on/0 off switch

	Column 1	Column 2
0	Construction costs breakdown	Costs (US$ x106)
1	Site Preparation	$13
2	Process Plant	$252
3	Process Utilities	$105
4	Services	$133
5	Infrastructure	$54
6	Total Directs	$557
7	Indirects, including EPCM	$145
8	Owners Costs, including spares and first fills	$159
9	Capital Cost, excluding contingency	$861
10	Contingency (16% of Directs/Indirects)	$139
11	Total	$1,000

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12
0	Cash Flow/NPV calculations (SLX Only)
1	Year	2018	2019	2020	2021	2022	2023	2024	2025	2063	2064	Total (A$)
2	Revenue of Excl License holders
3	GLE Paducah Revenue								$120,312,674	$240,625,347	$240,625,347	$9,504,701,207
4	IQE cREO/GaN revenue (guess)				$24,603,684	$30,472,956	$42,496,267	$66,728,098	$68,302,692			$1,281,994,123
5	SLX Income
6	Paducah Term Income				$6,578,947				$19,736,842			$26,315,789
7	Paducah Royalty								$8,421,887	$16,843,774	$16,843,774	$665,329,084
8	IQE Term payment		$6,578,947									$6,578,947
9	IQE Royalty (est)				$738,111	$914,189	$1,274,888	$2,001,843	$2,049,081			$38,459,824
10	Dev expense recovery from GLE + overhead (est US$15m)	$19,736,842
11	Interest income	$1,449,905	$1,237,751	$1,087,247	$758,413	$614,766	$333,402	$89,904	($87,135)	$24,776,702	$25,790,233	$447,484,661
12	Total SLX Revenue	$21,186,747	$7,816,698	$1,087,247	$8,075,470	$1,528,955	$1,608,290	$2,091,747	$30,120,675	$41,620,476	$42,634,007	$1,203,905,148
13	Cash at bank EoY + IQE shares	$53,455,623	$47,776,230	$35,367,387	$29,946,767	$17,979,631	$8,791,048	$85,923	$23,458,553	$974,903,350	$1,014,163,335
14	IQE Shares	$15,884,223										$15,884,223
15	SLX Staff Cost reduction	100%	100%	100%	100%	80%	80%	50%	50%	25%	25%
16	SLX Costs	$22,364,512	$13,496,091	$13,496,091	$13,496,091	$13,496,091	$10,796,872	$10,796,872	$6,748,045	$3,374,023	$3,374,023	$244,375,200
17	Dividend	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
18	Dividend per share	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
19	Nett Cash Flow (NCF)	($1,177,764)	($5,679,392)	($12,408,844)	($5,420,620)	($11,967,136)	($9,188,583)	($8,705,125)	$23,372,630	$38,246,454	$39,259,985	$959,529,948
20	Discount factor	1	0.915	0.837	0.766	0.701	0.641	0.587	0.537	0.018	0.017
21	Nett Present Value (NPV)	(1,177,764)	(5,196,644)	(10,388,994)	(4,152,525)	(8,388,312)	(5,893,238)	(5,108,596)	12,550,333	702,329	659,660	83,427,222
22	Cumulative (incl current cash & shares)	68,162,081	62,965,437	52,576,443	48,423,918	40,035,606	34,142,368	29,033,771	41,584,104	152,107,407	152,767,068	5,035,048,087
23	EPS	(0.00)	(0.02)	(0.04)	(0.02)	(0.04)	(0.03)	(0.03)	0.07	0.11	0.12
24	SP based upon P/E multiple	(0.04)	(0.17)	(0.37)	(0.16)	(0.36)	(0.27)	(0.26)	0.70	1.14	1.17

	Column 1	Column 2	Column 3
0	Paducah Parameters
1
2	Urenco Calculator parameters for Paducah	https://urenco.com/swu-calculator/
3		Assumed Assay
4	Product assay	0.711%	U235 content
5	Tails Assay	0.100%
6	Feed Assay	0.340%
7	Calculator Results
8	SWU amount/yr	3,420,070	SWU/yr
9	Nat Uranium UF6 product/yr	2,945,800	Kg/yr

	Column 1	Column 2	Column 3	Column 4
0	Cost Parameters
1		Amount	Unit	Ref
2	US$ Cost/SWU	$20.00	/SWU	http://www.wise-uranium.org/edumu.html
3	US$/yr Paducah costs	$68,401,400	/year
4	Debt amount (US$)	$1,000,000,000	US$	CIC rpt (see breakdown below from typical plant)
5	US guarantee loan rate	4.45%	%	US published rates
6	Repayment period	40	years	SLX announcement
7	Repayments US$/yr	$53,955,855	/year	Mortgage repayment schedule
8	Sustaining Capital (all years)	1.5%	%	guess

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8	Column 9	Column 10	Column 11	Column 12
0	GLE cash flow
1	Year	2018	2019	2020	2021	2022	2023	2024	2025	2063	2064	Total
2	Paducah revenue (A$)								$120,312,674	$240,625,347	$240,625,347	$9,504,701,207
3	AISC costs (A$)								($45,000,921)	($90,001,842)	($90,001,842)	($3,555,072,763)
4	Loan amount (A$)					$407,894,737	$434,210,526	$473,684,210.32
5	Repayments (A$)					($22,008,309)	($45,436,510)	($70,994,546)	($70,994,546)			($2,768,787,297)
6	Sustaining Capital (all years) (A$)								($1,804,690)	($3,609,380)	($3,609,380)	($142,570,518)
7	Stage payment to SLX (A$)								($19,736,842)			($19,736,842)
8	SLX stage payments								($19,736,842)
9	SLX royalty (A$)								($8,421,887)	($16,843,774)	($16,843,774)	($665,329,084)
10	Cost of tails (A$)								($2,503,930)	($5,007,860)	($5,007,860)	($197,810,470)
11	Construction Capital Costs (A$)					($372,368,421)	($355,263,158)	($367,105,263)
12	Nett Cash Flow (NCF)					$13,518,007	$33,510,859	$35,584,401	-$47,886,985	$125,162,490	$125,162,490	$2,356,710,022
13	Nett Present Value (NPV)					$9,475,389	$21,492,702	$20,882,680	-$25,713,734	$2,298,388	$2,103,025	$333,337,271
14	EPS					$0.04	$0.10	$0.11	-$0.14	$0.37	$0.37
15	Combined EPS	$0.00	-$0.02	-$0.04	-$0.02	$0.00	$0.07	$0.08	-$0.07	$0.49	$0.49
16	SP based upon P/E multiple	-$0.04	-$0.17	-$0.37	-$0.16	$0.05	$0.73	$0.80	-$0.73	$4.89	$4.92