Sphene Capital Models - missing MTUs?I went through the Sphene Capital report in some detail. I am hoping someone else has also gone through it and can let me know if I am reading it correctly.
I appreciate the details Sphene provided, it is a very thorough analysis of Almonty and their projects and the tungsten market in general. I also think their valuation methodology is reasonable and the detail and analysis they put into cost of capital helpful for understanding Sphene’s thinking.
The part I can’t figure out is the Sphene Sandong production estimates, probably the most important part, and to me, it appears they have it incorrect.
From table 20, Sphene assumes MTUs of 28,200 in 2023, 102,225 in 2024, then 117,500 in 2025 and 2026. My estimates would be for these MTUs Sphene is using tonnage of 70,000, 260,000, and 295,000 respectively.
My estimates of MTUs from Sandong are much higher. My base estimate is about 450,000 tonnes of ore mined for 185,000 MTUs in 2024, increasing to at least 643,000 tonnes for 278,000 MTUs in 2025, with the most likely case that sometime between 2025 and 2027 Sandong is mined at a rate of 1,200,000 tonnes for about 500,000 MTUs annually.
From Sphene document assumes Los Santos will produce for six years, 2023 through 2028 and attributes about 67,500 MTUs to Los Santos for these years before the resource is exhausted. Since the overall revenue in the Sphene model is forecast to grow at 0.5% annually from 2028 to 2029 with no revenue drop attributed to the Los Santos production ending, I think Sphene is suggesting that in 2029 Sandong will make up for the lost Los Santos production.
The 67,500 MTUs plus the previously assumed 117,500 is 185,000 MTUs from Sandong starting in 2029 and going forward.
The 185,000 MTUs I think Sphene is assuming for 2029 matches what I am assuming as the minimum production level to be expected in 2024 off of 450,000 tonnes mined. I didn’t just make my estimate up, I am pretty much using the numbers from official Sandong technical report.
If I have the above correct, it appears that Sphene is underestimating production from Sandong by 160,500 MTUs to in the early years (278,000 less 117,500), and up to 315,000 MTUs (500,000 less 185,000) in the later years. At the scene estimated $349 per MTU, they are missing between $44 million and $86 million of revenue annually.
Thoughts anyone, totally possible I’m misunderstanding the Sphene models.