valuation

My post at Top Stocks:

In relation to valuations, as an investor I am comforted with forecast production figures as we move along the timeline.

Since my initial investment over a year ago, the company has shown it can grow according to targets and timeframes that have been set. Fundamentals of the company have only got better in this period.

With that in mind I expect the company to continue with further milestones including the development of their own port at Punta Alcade, only 55km from the mine, substantially reducing OPEX – transport costs by $8.50 per tonne.

In addition, commentators have speculated that the benchmark price for Iron Ore could rise us much as 25 – 50%. I think in April 2008 will see a price around $60.00 mark

I have also noticed increasing exposure regarding lithium related news in the automotive industry. Further to this, potash has become a highly sort after product, so much so that SQM heavily relies on it for income.


I have come up with the following “general” Valuation for both companies post consolidation / demerger, ie; 280m shares for full production, circa 2010. I like what I see hence why I am holding.

Admiralty (ADY) :
My figures are based on the following assumptions :
Iron Ore Bench Mark Price - $60.00 1/4/08 (Currently $51.78 FOB basis ASX ann: 17/1/08) -
ADY Port at Punta Alcade – reduce OPEX (Transport Costs)
OPEX = US $20.00 per tonne or 0.333 (1/3)

2010 Santa Barbara Operations with Cia Minera :

7.2m tonnes x US $60.00 = $432,000,000 US
60% ADY = US $259,200,000
less OPEX = US $86,400,000
NPAT = US $172,800,000

AUD $1 = 90c US

NPAT = $192,000,000 AUD
Shares = 280,000,000

EPS = AUD $0.68
PE 8 = AUD $5.44

ADY Share price of $5.44

Rincon Lithium (RLL):
Assumptions :
Lithium : US $6,500 per tonne
Potash : US $290 per tonne
Opex : $35,000,000 (Thanks to Rio Grande’s Sodium Chloride)

2010 Operations at Rincon Salar
17,000 tonnes Lithium x US $6,500 = US $110,500,000
77,000 tonnes Potash x US $290 = US $22,330,000

Less OPEX = US $35,000,000
NPAT = US $97,830,000

AUD $1 = 90c US

NPAT = $108,700,000 AUD
Shares = 280,000,000

EPS = AUD $0.39
PE 15 = AUD $5.82

RLL Share Price of $5.82

Note : does not include repayments and interest.

Divide your current holding by 3.472 then clone into two (2) parcels ADY & RLL, multiply by the respective share price, for a rough value at Full Production.

As time goes on and ADY keep up with the announcements within the time frame risk will continue to diminish, as they have significantly over the past 12 months.

I would not want to be out of ADY any weekend


Remember it is important to DYOR