sp scenario, page-7

P, you may call this guess-work, but as for mining and minerals processing projects the risks and rewards are very high and the products prices during these volatile times +/- >100% in a year is not uncommon.

How do we price LYC?
Capital Assets Pricing Model price such risks assets by assigning DCF x probability under different outcomes /scenario.

The variables in deriving DCF are Product price, direct costs (ignoring sunk costs), financing and timing of net CFs.

Probability of technical or x factor delay, cost blowout and failure may be high. Eg. BHP & RIO Recent and past failure.

So what prob. do we assign to LYC Basket price = <$37, $50, $70, >$70 ?
Historic prices range from $10 in 2009, >$147 in 2011 to $37.45 recent months.
The price is very unlikely to drop to $10 as in Iron ore price back to $20 because its not possible to supply at such price at present. When Iron ore dropped from >$180 to $70 in 2009 very few forecasted that it will be >$120 today because there are now so much more supply from new and expanded mines.

What prob. do we assign to the timing of LYC cashflows, the cash costs, and the prob. of failure due high cost of rectification works or negative CF due to high cash cost ?

Therefore, depending on the prob. assigned for various possible outcomes, the LYC SP in 2014 could be < 57c, $2.50, $3.50, $5.80.

Such is the nature of LYC and many start-ups - High risk & High rewards. Not lotto, guess-work but calculated risks.