SDL: 10 year DSO mine life @ 35mtpa SDL: 15 (to 20) year Itabirite mine life @ 35mtpa
FMG: 50 year mine life at 355mtpa
FMG have double the mine life and 10 times the potential production capacity
so FMG should be valued at 20 times the price of SDL
but FMG market cap is 11 times that of SDL
FMG has a market cap of $17 billion
SDL has market cap of $1.5 billion
total SDL CAPEX will be $8 billion
at (generous) long term iron ore price of $110/t ($175 per dmtu), project has an 6 year payback
at current $167/t or $270/t dmtu, project has a 3 year payback
with Hanlong offering $1.5b for SDL and then having to incur $8 billion in capital costs, their capital payback period on long term price assumptions becomes 7 years for a 25 year project
if Hanlong offer $1.00 per share, their capital payback period on long term assumptions becomes 8 years for a 25 year project
if Hanlong offer $1.50 per share, their capital payback period on long term assumptions becomes 9 years for a 25 year project
but then, long term iron ore at $95/t ($150/dmtu) is not impossible
this blows out the capital payback periods to at 50 cent, $1 and $1.50 takeover to 9.5, 11 and 12.5 years
now your dreams are starting to sound expensive
good luck
SDL Price at posting:
52.0¢ Sentiment: None Disclosure: Not Held