vre valuation

I posted this to ASF last week, but decided to post it for you peeps here. Feel free to correct me if I am wrong.

Carnilya Hill

Absolute worst case scenario: 5,000 USD p/t of Ni x reserves (17900) / exchange rate of .85 = AUD of 105,294,118 before costs (highly unlikely)

Absolute best case scenario: 50,000 USD p/t of Ni x reserves (17900) / exchange rate of .75 = AUD of 1,193,333,333 before costs (also highly unlikely but possibly more likely than above)

Current value: ~ 50,000 USD p/t at exchange rate of ~ .82 = AUD 1,091,463,415 (before costs)

Most probable scenarios given 27 month Ni contract: 40,000 USD p/t of Ni reserves (17900) / exchange rate of .75 = AUD of 764,852,812 (after possible low cost scenario) 30% attributable to VRE = 229,455,844

35,000 USD p/t of Ni reserves (17900) / exchange rate of .85 = AUD of 494,365,433 (after possible high cost scenario) 30% attributable to VRE = 148,309,630

High cost scenario is derived from Mincor's average cost for total nickel production (~13500 AUD p/t). The lower range derived from the previous average cost (~10600 AUD p/t). HOWEVER, a point to note. This mine was closed when Ni prices were at around USD 4,500. So, it is possible that costs may be as low as 6000AUD p/t.

I would assume that the costs will be somewhere between 6000 and 10600 AUD p/t which would be consistent with MCR's previous projects of this nature, and also in their "non-BFS" "BFS" where they stated it was low cost. Obviously, the fact that it is a recommissioning limits the costs.

Also, of note, is in the resource statement dated 29th March, the last drill hole (only 2 weeks ago) was the most promising, with further drilling expected. There is plenty of potential for resource upgrade on this mine (which MCR has a great track record of producing).

No wonder MCR and VRE are both so bullish on it. The figures are enormous. However, it does not take into account the offtake agreement with BHP or cobalt credits.

Bronzewing

Total current value = AUD 350,900,000 after costs. 100,000 ounce production per year (58,483,333 after costs), total proven resource of 500,000 ounces with very high probability of a further 100,000 (factored into value). And with aggressive exploration in the region, it may have some upside.

Compared with similar sector competition in CRE. VRE currently has a market cap of 114m, CRE with 104m market cap.

CRE has a proven resource of 479,000 and annual production of 479,000. Similar costs, but CRE has had management problems and production delays.

So to me it appears as if VRE has only been rated on its gold potential (compared with CRE), and the market has not yet factored in the value of Carnilya Hill. A big re-rating is on the cards perhaps.

I'm not good at attributing value to a share, but if the BFS is positive and close to these figures, the potential is there for the SP to go to 60c close to production at Carnilya Hill. (Depending on what the market deems to be a proper time cost factor of course.)

Cheers,
Chops.