Funny but from macquarie analysis in jan this year they said
Our base case discounted cash flow (DCF) valuation of ~A$9 per share, already assumes that both the heap leach and the underground Ranger 3 Deeps projects are approved.
I mean funny because what happened from Jan to May to make heap leach go from 'assumed approved' to 'nil chance approved'
Honestly, if we can figure out if this heap leach will go ahead, that is worth $4 a share alone, both Macquarie and Morningstar agree on that.
So take away the emotion, the bottom, bottom price for this is indeed $5, with heap leach the bottom, bottom is $9
above heap leach was from mid Jan... from late Jan we have macquaries saying
"Delays in the expected delivery of the heap leach were verified by management; a risk we have long been highlighting. Production is now anticipated in late 2014, leaving An approximately two-year gap when the only output will be from low grade stock being processed through the existing plant."
then is mid April, they say
"We lower our target price to A$5.50 (from A$9.50) after incorporating the impacts and risk weighting of the heap leach and Ranger underground projects."
so, again, I ask what made Macquarie analysts go from 100% heap leach probability to nil between March (March value was still $9.50)... morningstar have been consistently 50% chance of it happening
anyway, it seems the 'analysts' will have us at our bottom right now (5ish); and if any good thing happens in the next two years, it should provide upside
so let us assume the water processing is a winner, all are happy, Mirrmar approve Jabiluka, they find a bit more around Ranger, there is a shortage, the price goes up, and the share ends up around the $30 mark... hey, we have years and years to wait for a good thing
ERA Price at posting:
$3.30 Sentiment: LT Buy Disclosure: Held
