so... whats the go with wlf(o) ? - summary, page-9

Hi Redbeard

The base case IRR is 21% at APT prices 25% lower than current.

At recently traded APT prices the IRR is 30%+.

Of course you're right though, the figure taken to the bank will be 20%+.

In practice an IRR ultimately of 30%+ is foreseeable (not a given) as China, which currently produces ~60% of raw Tungsten globally, is expected to become a net importer by 2013. This is around the time the first WO conc will be shipped from Hemedron.

I've been looking at opex and capex and trying to get to total cost figure per MTU. Opex is about $100 / mtu as per DFS.

To get to total costs on top of opex, overwhelmingly the additional component will consist of capex.

Assumptions on raising $160m needed for capex:

50% debt --> $80m
12.5% merchant/offtake cash --> $20m
37.4% shares --> $60m
PLUS ~$25m costs on the $80m debt (assuming payback period of 3.25 years [as per DFS] at a rate of ~12% + costs - I think this is conservative ??)

TOTAL CAPEX --> $185m

Now I've looked at company presentations, DFS's etc of other miners and many cost capex per unit of production so I'll do that here. Assuming 10 year production at average of 345,000 mtu gives $54 / mtu.

OPEX + CAPEX = ~$155 / mtu.

Using 20% discount on APT price to achieve 65% WO conc price, as well as UK corporate tax of 23% (as per DFS) we get the following tentative and rough "profit" margins, before other deductions such as depreciation and whatnot (but not interest, which i've already factored). So therefore these are a bit optimistic as there no doubt will be other costs, however CAPEX and OPEX and INTEREST as I've attempted to factor will certainly make up the vast majority:

$360 APT --> $100 / mtu --> $34.5m / annum
$415 APT --> $136 / mtu --> $47m / annum
$470 APT --> $170 / mtu --> $59m / annum

Assuming Wolf issue another 100m shares between now and 2013, working on a PE target of 10 a couple years down the track:

$360 APT --> $34.5m / annum --> $1.725 per share
$415 APT --> $46m / annum --> $2.35 per share
$470 APT --> $59m / annum --> $2.95 per share

Probably a bit more than 100m shares will be issued, and as I've said above some more costs on top of OPEX + CAPEX + INTEREST, so scale the above down perhaps to

$1.40
$2.00
$2.60

OK I need to do some work I actually get paid for before my boss takes my balls