the trough, page-15

Thanks again Ferg. I think that the difference between your evaluation and the more bullish amongst HC contributors lies in the inclusion of components of value to the company and the probability applied. You are choosing (and understandably so) the projects that are likely in the short term, with rough probabilities that are not too low. However, the equation is incomplete without inclusion of the high value/lower probability projects. Just because it is difficult to estimate a probability for these events, it does not justify excluding them. It just makes it more difficult to come up with an educated guess.

eg... Take Corridor Sands. This is a huge value project. As mentioned previously, the WMC feasibility design was for 375,000t/a by Year 3, expanding to 1,000,000 t/a by Year 12. What is the probability that BHP will use APG technology in Mozambique? 1%? 5%? 20%? 60%? I might have my own view, but I would not be game to take that figure to a board and certain action on it! (probably why I work for myself!!) However, for the sp value calc to be complete, ALL projects need to be considered, albeit with lower probability applied.

Also, if we are looking at the price that should be asked for a company, it would concern me if we just used something akin to a "cost plus" pricing model (granted... there is a bit more to your estimates than that). It would seem more appropriate to be pricing the company according to the perceived value to any particular customer. In BHP's case, what is the cash difference between exploiting APG technology and using any alternative. If APG technology is the only one appropriate to exploit a particular resource, what is the difference between exploiting it or leaving it in the ground? Or allowing their competitor to exploit it?

Correct me if I'm wrong, but I don't think your NPV calc's take these issues into account. Saying this, I still think the NPV's are a valuable indicator to make sure we are in the same ballpark

I'd be interested to hear the results from your model should you include Corridor Sands ... high value/lower prob.. Inclusion is reasonable considering that it has been agreed that BHP would have the option to negotiate to have sole use of the technology in Africa.