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Hi.

Hope all are well.

Often, as in this post, MLS is compared to EXT. Management of MLS has also made this comparison. So, lets play around and use EXT as a benchmark for forecasting what MLS could look like in a few years......

1. Like EXT, I believe MLS will be taken out long before any actual mining occurs. This exercise is done on this basis.
2. EXT took 6 years to get to a stage where their resource was fully confirmed and accurate. MLS has been held up for years by court action.
3. EXT has in effect been sold and the market values the company at around A$2.2bn.
4. Like a lot of you, and taking into account the conservative nature of MLS management and their announcements, I was blown away by their stated comparison between their RadonX results and EXTs results (relating to Husab). What was made clear (looking at the median values) is the fact that the MLS resource could be at least double that of EXT. Maybe more. But for now lets just assume that the potential value of the resource is the same (that is, the in ground uranium value is the same).
5. From the 2006 FY through to the 2011 FY - EXT spent $A91m on exploration expenses. With a bit of number crunching and extrapolation the total exploration and operational expenses from 2006 up until the end of 2011 was around A$180m. As such, it is clear that MLS are going to be in need of serious capital as we progress. As you all know, shares are currency - the higher the share price the better for the company. So expect capital raisings on a continual basis in line with ongoing exploration results.
6. Taking into account current issued share capital and the outstanding options (which are all in the money), the total outstanding shares is 1,004,401,877.
7. Assuming the cash recently raised via share placements has been spent (for the sake of being conservative) at the moment the only additional capital coming into MLS is when the options are exercised. Assuming a share price above $A0.05 this will raise approximately A$3.3m in September 2012 and A$3.2m in December 2013. So, using the exploration and operating costs over the full period of the exploration program for EXT - MLS has a shortfall of A$173m which will be required to be in the same position EXT was at the end of 2011 (resource fully stated and confirmed). I do believe MLS will be able to get the same position as EXT was at the end of 2011 at far less cost but once again lets be conservative.
8. Assuming MLS raises this shortfall over the period by way of share issues and that the cost of such funding is at an average price equal to 4 times the current price, the end result will be that MLS has outstanding shares of 1,689,835,070. You have to assume that if MLS progresses as we would expect (assuming the drilling program confirms the prior exploration results) that the share price will increase a lot. As capital will be raised in stages, we can’t assume that MLS will have to raise capital at the current share price. Rather they will be in a position to raise capital at way higher prices and for the moment lets assume that over the full period of exploration the average price of shares issued is 4 times the current price - or around A$0.25. Once again, this is conservative.
9. As this post is in reply to a comparison with EXT (I believe we can draw such a comparison) what could the future share price of MLS be? Assuming a constant uranium price (I believe it will increase) and assuming that our resource is at least equal to EXT's, our future value (as expressed by market cap) should be equal to EXT's current market cap. So on that basis our market cap would be A$2,200,000,000. Although the Namibian Gov has said that existing EPLs/licences won’t be affected by a change in policy - lets assume that we have to "give" 10% away to the Nam gov (this won’t happen but lets play along shall we) - then our market cap would be A$1,980,000,000. To get the implied share price we take such value and divide by the outstanding shares of 1,689,835,070 to get an implied future share price of $1.17 per share for MLS.

Now - a few disclosures. This exercise is to show the potential value of MLS to those of you who believe we can use EXT as a benchmark (I am one of these people). Many of you may disagree. Also, I believe the cost of raising capital will be cheaper than my assumption - this will have a big positive impact. I also think Uranium prices will rise over the next 2-3 years. So, in all, when comparing MLS to EXT I believe I am being conservative.

I hold MLS because I believe that all the exploration results thus far are extremely positive. However, as we all know, until we have drilled extensively there will always be risk. EXT have a final confirmation and feasibility study done. We are only at the beginning - so large risk still remains. However, I hold MLS because I have reason to believe that our actual resource IS going to be huge.

Thought the above was an interesting exercise..........

All the best
Obelix