RE:ComparisonFloridas2000 wrote: MacDonald Mines Exploration
- has property near Sitec and Rogue Resources
- just started exploration
- needs much further financing
- MARKET CAP OF 2.5 MILLION
Select Sands
- has property in the US near with access to trains and a market to sell fracing sand to
- in production, looking for agreements
- no need for financing now
- MARKET CAP OF 85 MILLION
Rogue Resources
- has property near Sitec and looking to run a low OPEX
- looking to go into production this year. Has LOI for offtake agreements and a strong market like SNS
- further financing will be limited
- MARKET CAP OF 5 MILLION
Something is not right. Rogue valuation needs to be adjusted and it's not a matter of if but when. If it goes only to half of Select sands valuation you're looking at a price of $5. Plus you have many investors who bought around $1 so selling pressure won't come in until that limit is reached.
I don't know the NPV of SNS compared to Rogue but if it's close then Rogue has potential to eventually have the same market cap which is about 17x current prices.
Hi Florida, you bring good points. In terms of project advancement, Rogue is quite de-risked and could be trading at higher value. Let me give you some details as how we compare to SNS.
SNS is in frac sands and industrial sands. It has aligned its strategy to the fracking industry because of potential high demand in this sector, and their strategic/location position to other competitors.
Currently, margins are real low for frac sand as there is a surplus in the offer and fracking is only starting to recover from the brutal 2014-2016 oil shock.
in any case, Select Sands as a FS/PEA pre-tax NPV valued at US $160 million and a post-tax NPV valued at US $92 million. Considering they have already purchased, at a great discount, their production assests, it surely values the the before tax PEA at 200US Millions.
But their NAV includes sell prices clearly above current market prices, and probably above mid term prices, as it will remain a competitive sector. They have incorporated nearly 900 000 tons of sales per year. So far, they have secured very very low volume. They are in a good position,
but it could take a long long time before they reach that max output. More chances they get a buy-out offer before they reach the max output.
So RRS is clearly putting a PEA with a more acheivable short term sales target of 160kt of silica products. Keep in mind that it is the current "average" limit for a quarry mining operation.
If they want to go above appx 200kt/y sales, they will need to upgrade the mining permits. Put that is acheivable,it's just a longer and more expensive process.
If RRS were to put a PEA saying they would sell 480tk per year, they wouldn't get an after tax 24M NAV (PEA) but more likely a minimum of 75M + NAV(considering some cost are start up cost and that processing circuit was with a nominal capacity of 380kt if my memeory is correct)
In the updated PEA, we will likely see a great reduction in CAPEX and significant reduction in OPEx with a Direct Ship Ore analysis. But the maximum output will still remain limited by the quarry permitting designation. But an after tax 35M +/- new PEA is quite possible.
And we will probably see a minimal requirement for dilutive financing to pay for Capex.
In the short term,my expectation is that RRS will secure more sales that SNS compared to their PEA/FS, and that RRS will be in expansion there after, and upgrading their permitting so they can get more ore out of the site(long term 3-5 years after production start).
RRS isn't as much exposed to price fluctuation as they can sell into a lot of markets. SNS is really linked to the price of frac sand and demand for sand will be tied to oil prices...
As fracking for oil is very sensitive to oil price being above or around 50$(where new capacity can be added), SNS can be very volatile and can get major shift in production due to volatile short term demand for products.
Both very advanced plays,but RRS is trading at 1/6 of new PEA value(speculative value from my pArt 35M PEA after tax). SNS is ready for production, fully equipped, and trading at 106M (from a spike of more than 150M). Considering an after tax NAV of 92US Millions + 30M for capex that is already paid(40US M - depreciation tax loss ) thats 122US => 160M CAD
So they are trading at around 60% of an ajusted PEA NAV. So we can see, why there was a correction post 2$ spike as clearly, the risk reward ratio there is quite bad for a company that has yet almost no sales. Please keep in mind that are just rough rough numbers. But that is to give an order of magnitude.
RRS tading at 6M out of a projected updated PEA(my speculative valuation... you can use 24M if you like) is valued at appx 17% of projected PEA value. If you consider they could double capacity in 5 years, that would be below 10%. So the risk reward ratio is clearly better...
That's why i'm expecting a "substantial" positive market correction when Offtakes and/or new PEA is out(more with offtakes). Once in production, RRS will be presenting a new plan for 2018 and... then... we will see all the upside (reward potential) for people that want to stay the course on a RRS that is cash flow positive and growing.SNS has a project of 900kt/y... so before they get there, their value proposition won't be changing that much.
Q2 is almost 1 month away and Q3 4months. So between now and then, a lot of derisking can occur.With sales in Q4, this will be a completely different valuation model for RRS.
It will be very interesing to see what will be the 2018/2019 expansion projects, in silica or other blue sky assests.
But lets get this going first... I'm long in RRS, i started my position in Februay/March 2015 with 10k(100k) shares, and i have been adding at all levels.
I'm quite above my original position now!