Post by
Contrarian333 on Feb 22, 2021 8:52am
Here ya go Collins et al!
Rough Estimate of SCN Nickel Operations Contribution to Corporate Cash Flow at Varying Nickel Prices:
This has to be a rough estimate for the following reasons. 1. I’m using the midpoint NDCC guidance for the year. With cobalt prices higher this will have a positive impact (reduce NDCC) but also other input prices will have risen and have had a negative impact (increase NDCC). Net net it should have a positive influence but we don’t know by how much. 2. NDCC does not capture all costs of production (mining, processing, and refining costs) and therefore the cash flow number produced here will be modestly overstated. That said, here is what the numbers roughly say:
Mid point of production guidance is 33,000 tonnes. Sherritt’s share is 16,500 tonnes or 16,500 X 2204.62* = 36,376,230 pounds
Nickel at $8.50 – 4.50 NDCC (midpoint of 2021 guidance) = $4.00 cash flow
36,376,230 pounds X $4.00 = $145,504,920 USD cash flow
145,504,920 X 1.26 (current fx) = $183,336,199 CDN cash flow
- $57,000,000 capex (2021 guidance)
- $30,400,000 approx cash interest costs ($357.5m 2026 debs at 8.5%)
- $22,000,000 corporate costs
= +$73,936,199 net cash flow / approx. 400,000,000 s/o
= 18 cents per share net cash flow
Attach the multiple you wish to this cash flow stream. I use 10X for simplicity, because of where interest rates are, and because investors are likely to bump their multiple higher as the cycle matures, as the price rises and as they anticipate further price increases.
At $10 nickel the net cash flow number (all else being the same) is +$142,687,274 or 36 cents per share
At $12 nickel the net cash flow number (all else being the same) is +$234,355,374 or 59 cents per share
At $15 nickel the net cash flow number (all else being the same) is +$371,857,523 or 93 cents per share
*metric tonnes. A previous poster used US short tonnes which is not correct.
Comment by
YourFriendo on Feb 22, 2021 5:01pm
Disagree on a few points: 1) They have only hit 16,500 once in the last 5 years. 2) I think you are underestimating input cost rise. Plus you have to add C2 cost as those a real cash costs. My esitmate is they clear 2$ a pound at these levels at lower production. 33,000,000 X 2USD X 1.30 USD exchange = 86 mill less 57 less 30 less 22 = -23 million
Comment by
DRYOASIS on Feb 23, 2021 3:19pm
By my calculations which are not always right lol, at today's Ni and Co prices compared to Dec 29/2020 profits are already over $160 mil for this year, if ni & co prices keep this trend, next quarter results and the rest of the year should be very interesting, big S due for re-evaluation imo. Do your own due diligence please.
Comment by
rkhosla on Feb 23, 2021 3:26pm
I like your math : ). Agree. They do have some significant deferred costs such as capex. The management also seeks to feel overdue for bonuses.... so it's not all profit but I do like your math.