RCH has recently acquired six mining rights in Indonesia that cover the Toli-Toli Moly Project plus a number of other lightly explored nearby projects. Anomaly B at Toli has completed 7,000 meters of drilling in 36 holes plus a mass of other data that can quickly be converted to a JORC resource. The current NON JORC resource is 106,000,000 tonnes of moly at grade of .14% (suggestion that drilling/sampling/assaying lost 20% of that grade).
In mid 2006 Moly Mines reported a JORC resource of 300,000,000 pounds of moly in 500,000,000 tonnes at a grade of .06%. This roughly equals the amount of moly inferred in RCH's Toli project EXCEPT that the TOLI grade is almost triple. RCH says it should be able to complete a (near??) JORC resource figure from all of the detailed data already completed. This next stage should cost $500,000 and take six months and include imaging studies, trenching and detailed drill plans.
Now RCH says that the Toli Moly is contained within a zone 30-60 meters in thickness WITHIN a zone 200 meters wide and 1850 meters long. So the inferred tonnage could grow by multiples AND be as big as the MOL project.
In mid 2006 MOL projected cash operating costs of US$3.80 per pound on a grade of .06% for an open pit operation. Current capex to process 20,000,000 tpa of A$1 billion.
Taking all of the above data and looking at relative valuations MOL was valued at half a billion A$ at the peak of the recent bull run and now is half of that figure. RCH with a potential project that may approach the same scale as MOL is currently worth A$34,000,000 (which includes the shares to buy the project but non diluted for oppies). Fully diluted that is A$51,000,000 with cash of about A$5.5 million.
Taking MOL as our model and taking their 2006 CAPEX figures a production rate of 10,000,000 tpa CAPEX is A$550 million and assuming RCH grades are at least double that of MOL cash operating costs equal US$1.90 per pound. That produces 30,800,000 pounds of moly (assuming recovery losses equal the 20% loss of moly in assays) that produces an annualized revenue number of US$1.01 billion less cash costs of US$58,520,000 million leaving free cash of appox US$940,000,000 / A$1.03 billion.
Which ever way u look at RCH it is massively undervalued. A current valuation model may suggest a range of A$100-150 million (which roughly equates with MOL in mid 2006) as a reasonable "ball park figure. That places each fully paid share at around 10-15 cents (due to hi grades). Good luck to all longs
RCH Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
