RE: RE: RE: LBE Defamation, Yeah Right -- The LBELegend7,
Sorry I didn't post sooner but I was away this weekend.
You didn't even begin to answer the question. Everyone knows that there are limited reserves but it all comes down to CONTROL and the options on the PREFERRED SHARES. Control, via JJ's 51% interest, allows JJ to have complete control over all funds, how they are distributed, and whether they may or may not exercise the "PREFERRED" shares. This, in conjunction, with the massive dilution that has already taken place, with the mega dilution that may also occur in the future, with absolutely "no way" to influence how JJ influences how those monies are managed leaves minority shareholders "hanging"! This, in conjunction with, Liberty Mines limited reserves (less than 5 years) creates great uncertainty to investors. It is hard to believe that you do not understand this but, as many before me have indicated, is why this share price is flat. You certainly are on the low side as far as cost of mining is concerned, you have not factored in debt obligations, capital costs, nor have you factored taxes at 35% of gross profit (SRK Estimate). The biggest factor impacting the return per share is DILUTION, after all of the costs are factored in. So, if we take the HART mine, which is LBE's largest mine by far, and we reference the numbers in the SRK Preliminary Economic Assessment report of Feb 26/2010, SRK key estimates from the report are as follows:
_ i. LoM net NSR revenue based on plant feed of 1,729,100 tonnes at 1.29 percent Ni is estimated at $246
_ million. (Assuming $7.00USD/LB NI @ 90 cents US/ CDN Dollar -- or approximately $7.70CDN)
So, to achieve the $246M LOM total, we have 1,729,000 tonnes (classified as "potential mineable tonnes") x 1.29%NI x 2200 = 49,069,020 lbs of NI. To achieve the SRK estimate of $246M it looks like SRK used a combined recovery rate of 81%. So, if we now reference the cost portion of the SRK report:
_ ii. Mine site unit operating costs are estimated at $53.77 per tonne milled;
_ iii. LoM operating costs are estimated at $93.0 million;
_ iv. Total project capital requirements are estimated at $65.3 million;
_ v. Undiscounted pre-tax LoM indicative cash flow is estimated at $87.8 million;
So, if we take the 1,729,000 tonnes times the $53.77 per tonne, we have a cost of $92,968,330 which does correlate to the LoM Operating Costs of $93 Million. So if we take the $246M less the $93M for Operating Costs and $65.3M for capital requirements it leaves you with $87.7M by my math, but jives with the SRK number of $87.8M. SRK has indicated that this is pre-tax and the estimated tax rate in Ontario is 35%. So if we take $246M less the Operating Costs of $93M and half of the Capital ($65.3M/2 = $32.65M) we have taxable income of approximately $120M, which is tax owing of $42,175,000 leaving $78,375,000. (Depreciation on Capital Items is more complicated than that but the number I used is a quick compromise). Now, if we divide those into the outstanding shares we have:
$ 78,375,000 / 168,000,000 shares =
46 cents per share over LoM (approximately 5 years)
If the "Preferred" shares are executed then the following happens:
$ 78,375,000 / 354,000,000 shares =
22 cents per share over LoM (approximately 5 years)Now these numbers are based on the $7USD @ 0.90US/$1CDN, or $7.70CDN per pound. The number improve as the price of Nickel moves up but with the economic uncertainty in the air as the recovery loses steam will make NI prices quite volatile. The main point being here, the dilution has had not only a dramatic effect on any potential return one will receive today, but will have on any future LBE endeavours. I used the Hart mine as it is not only one of the largest, if not the largest NI strike in the Shaw Dome, but what are the chances that LBE will continue to uncover similar discoveries to generate a respectable return for investors in the future. There is no guarantee that there will ever be a return because JJ has controlling interest which means they can use those profits as they see fit. I did not factor in existing LBE debt as I wanted to present the possible return from the Hart mine, by far the most significant holding of LBE. Lastly, the MD&A lists the HART Mines as "Potentially Mineable Tonnes" as these numbers were presented in the SRK "Preliminary Economic Assessment" that contained the following:
Cautionary Statement
This Preliminary Assessment is preliminary in nature. It includes inferred mineral
resources that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as mineral
reserves, and there is no certainty that the preliminary assessment will be realized.