The following is an exercise in the method of valuation I personally might undertake when assessing a resource co. for my own interests.
The reason I share this, is to show why I believe CDU is likely to be very fairly valued at this point, and in my view is not likely to rise a heck of a lot over the next year or so, aside from perhaps market over-reach on some kind of ST sentiment.
Based on net present terms, the reported resource and using the assumptions listed at the end of this post.. The exercise suggests, that CDU held strictly for ten years starting now, is today worth $5.47 in net present terms. I include in this example of valuation, the likelihood of 50% of all NPAT returned to shareholders and the other 50% reinvested in the company. So in the first image, the 3 bold figures are the NPV of each component of my prediction of revenue and the dividend returned and the component reinvested by the company (summed to arrive at the 10yr NPV)
In my view, todays SP is quite a high one, considering the length of time the investment would need to be locked up and the risks inherent to the minerals sector.
The next image is an example if one sold out after five years..In this case, the np valuation is $4.71 The residual value is the re-invested component (exluding any yield) as a pro-rata value averaged over the 5 years.
The next image is an example if one sold out after 3 years. In this case, the np valuation is $4.04, with residual treated the same but over 3 years.
My point is that although I understand there are a lot of earnest stakeholders with great intent, from an impartial perspective, entry above $4 is very risky and not particularly attractive as far as returns are likely to go.
Anyone who has averaged in below $2.37 is of course doing very well and has plenty of travel even if things get at all shaky along the way, so congrats if that's you. My suspicion is that there will likely be a surge prior to mining, based purely on the well painted expectations, but that this would be unlikely to breach $5 and highly likely to reverse well below $4 and stay there. I do think there will be heavy shorting pressure as entities spot their tops, with the knowledge that people are in a way 'stuck'. Going private might be a good move given the vulnerabilities often discussed here.
In terms of net revenue free of divvies, I believe the MC is way overvalued, in my view, probably by a few hundred million, particularly if reversion to mean commodity values is likely.. but If you're in low and staying the full course, then good luck, I hope it works for you.
I do think that CDU must feel they have something to lose by opening up their in house feasibility. Most good miners are proud to show it off.
just my honest opinion on this as public stock.
My Assumptions:
30Mt at 1.7% CuEq 10 years at 3Mtpa 10% waste dilution $3 lb Cu $15 lb Co 12% discount rate $1 lb mining/processing/transport costs 30% corporate tax no royalties 50% of NPAT going back to shareholders 50% of NPAT reinvested by comapny static 200 M shares issued $300M capex all told AUD/USD 1:1 No exploration upside
CDU Price at posting:
$4.37 Sentiment: None Disclosure: Not Held
