RE: RE: No debt folks...(reply) One has to recognize the compelling optionality in the stock price at
.40. There are 235 million fully diluted shares x
.40 = $94 million market cap + $50 million of 10% notes equals an Enterprise Value of $144 million.
Let's say that an additional $25 million of 10% debt is taken down and another 5 million options/warrants are issued. Then, 240 million fully diluted shares and $75 million of debt, total EV of $171 million.
If CMK reaches a run-rate of 2mm tons 2 years from now and achieves $17.1 EBITDA per ton, that would be $34.1 mm in EBITDA. If we place a 5x multiple on that $34.1mm of EBITDA, that would equate to the current $171 million fully diluted EV.
At
.40 per share, if Cline (or the new owner of Cline's assets) can generate just 34 million of annual EBITDA, then an investment today is fair value.
However, if Cline (or the new owner of Cline's assets) reaches a 3mm ton run-rate in 2-3 years and gets $25 of EBITDA per ton, that's $75 million of EBITDA x a 5x multiple = a $375 million EV. $375-$75 of debt = $300mm. $300mm divided by 240mm fully diluted shares = $1.25 per fully diluted share, vs. the current price of
.40 per fully diluted share.
This is not a pie-in-the-sky valuation as I added 5mm more options/warrants AND an incremental $25 million of debt.
Importantly, today's news pushes back the timing of Cline needing to potentially draw down an additional $25 million of debt.
At
.40, one is buying $34 million of annual EBITDA with zero value for other non-core assets and the law suit against the Canadian govt. To be clear, I don't think one should ascribe any value for those things, but they are free. You also get for free the potential upside of a longwall operation in 4-5 years.
A longwall might be beyond the current management's capabilities, but an acquirer like Peabody Energy could certainly pull it off.