valuation of perkoa and mumbwa abt 4 bucks, page-2

Correction - I MADE A MISTAKE RE CALCS IF COPPER - ITS ACTUALLY GOING TO MAKE MUCH MUCH MORE MONEY PRE TAX n DEPRECIATION! I forgot to multiple the amt of copper pounds by the MARGIN of $2 per pound in the previous post!

100,000 TONNES of Cu * 2200 (to convert to pounds) * MARGIN of $2/llb * say 70% (assume we give glencore 30% and we retain 70%) * AUD 1 (parity) = 300 million dollars in EBITDA!!!! Post tax of say 25% we get 225mill less depreciation (for both projects) of say 25mill, so we get roughly 200mill in POST TAX past depreciation PROFIT

Even if we assume 75,000 tonnes production ala SFR, well make 230mill pre tax n depreciation

Post tax n depreciation @ 75000 tonnes prod wed make circa $150mill post tax n depreciation!


Dillution: Lets say that over time we do 2-3 more cap raisings at an average price of say $3. And we double the share capital to say 350mill shares by issuing an extra 150mill shares @ avg $3 for each raising.

That would give us HALF the necessary funds IF we indeed need circa 1billion in CAPEX to set up the operation. The CAPEX will be dependent on the overall SIZE of the operation. I remember EQN (equinox) a cpla years ago needed an extra circa 500mill (from memory) to upscale their plant to cater for increased production to 100,000tonnes+ (but again they were a LOW grade mine, and we are much HIGHER GRADE ala SFR by the looks of things. SFR needed about half a billion for theuir high grade mine to produce circa 75,000tonnes (again roughly from memory)

Lets say we need close to $1billion if we have a LARGE resource and a LARGE plant etc to cater for high levels of production

From the above we can see that we can raise pretty much HALF the funds from cap raisings over time by a little more than doubling the share capital from 170 to say 350mill shares on issue

**** NOw our ACE up our sleeve is that we also have GLENCORE as a possible JV partner or financier!

Even if we give up 30-40% of the company, THEY can give us upto 50% of the funding if need be (dependent on how much we can raise or how healthy equity markets are; Or how LARGE the resource is - if indeed it is enormous and high grade the share price will SHOOT UP and well easily be able to raise the funds)

GLENCORE is the ACE up our sleeve

**** We worked out that at zinc price $1.00 avg long term and at circa $3.50 for copper long term and AUD at parity (altho i think the AUD will fall, but lets assume parity)....that we'd make circa $150mill POST TAX n depreciation on 75,000 tonnes of copper production (30% to GLENCORE)+ Perkoa gives us post tax n depreciation rougly 15mill

So total 165mill post tax depn and glencores shares of the projects @ 75kt copper

If share capital is 350mill (roughly double)

EPS is 165/350 = 48 cents a share

******On 100kTonnes of copper plus perkoa wed make 215mill post tax and total dprn of 20mill.

EPS on 100kt Cu + perkoa : 215mill/350mill shares = roughly 60cents per share EPS

U give a PE of 8 and you get $4.80 value

PE 10 you get $6.00

So its worth abt 5-6 bucks on 100tonnes of Cu prod NPAT plus all dilution plus 25% taxes plus 20mill depreciationplus 30% to gelncore