These broker reports always make compulsive reading. It all...

These broker reports always make compulsive reading. It all sounds so easy...!

some bull points

We recommend buying GIP with >100% upside to our base case NPV of A$0.12ps.

Based on Petra modelling we estimate the AD project NAV at $243m, with an IRR of 30%. This compares with independent consultant Noah’s Rule (July 2011) estimates of an ungeared NAV of US$593m and IRR of 39.2% for the project.
The key divergence in valuation is due to our more conservative commodity price assumptions and incorporation of slightly higher capital requirements. Our tantalum price (at US$90/lb) contrasts with prevailing spot prices of US$125-135/lb. Our Feldspar price of US$25/t is lower than the US$30-40/t FOB prices that are prevailing within the region. In our forecasts we also assume world parity pricing for fuel, notwithstanding that Egyptian subsidies of almost 75% exist.

Tantalum is not an exchange traded commodity and volume and prices are negotiated between seller and buyer, meaning that the market is not particularly transparent. That said, the outlook has become increasingly favourable, judging by the recent strength in “spot prices” which are reported to be upwards of US$140/lb. (Refer Appendix 2 for additional data).