2012 was the last feasibility study which provided a NPV of $161m. The assumptions were $54m capex. Tungsten price of $US 290 Currency $1:$1. This gave a payback period of 1.5years and Pre tax IRR of 60%. These are pretty health numbers.
What has changed?
1. The currency is now between 70c to 80c. Assuming 75c it changes the value NPV to say $215m. 2. The capex is likely to be lower. Recent management updates suggest two part funding from cashflow or debt/grants of around $45m. That's a 17% drop. 3. The tungsten price assumption is similar and in line with the other tungsten players. 4. Opex. The expected opex in 2012 was about $135-$144mtu. The recent webinar indicated the cost was going to be below $100US. (<$A133mtu). This suggest the opex maybe a little lower than 2012, especially when there is no royalty payment. 5. The 2012 didn't include any drilling (drilling rig arrived today), so there should be some improvements. 6. The Stockpile grade from recent testing maybe better than expected. 7. Quarry and Head lease now owned by EQR with the quarry license expanded from 100k tonnes to 1m tonnes per year. Previous management suggest that's worth $15m to $25m.
The only negative to the NPV is the tailings and stockpile are part of the JV rather than 100% EQR. Not sure of the value.
So, at a guess, the new NPV should be in the range of $250m to $300m.
Company market cap is sub $50m, so we are trading at 20% of the NPV.
Still plenty of value given other potential factors haven't been included.
1. More resources and extended mine life from drilling in Iron Duke, Petersen's and Dyke West. 2. Tungsten cluster 3. Tungsten smelting can add 30% to the value of the tungsten. 4. Rising tungsten price.
Any thoughts or other assumptions to be made?
Any other NPV guesses?
EQR Price at posting:
3.5¢ Sentiment: Buy Disclosure: Held
