Added som KRI below CAD 4Thank you Mr Market
Khan Resources
https://www.b-tv.com/i/videos/Khan.wmv
Disclaimer : I take no responsibility whatsoever for any errors, bad conclusions, important facts missing etc that might affect my analyses and their readers in any respect, but I always try to keep the facts accurate, as well as the calculations with their usually simple mathematics. Sometimes even the companies analysed deliver false information which could be impossible to detect for me and many other interested parties. In general I trust the corporate information and use it for my analyses. The future can´t be predicted 100 % and the stock market in particular is associated with considerable risks on the company level, but also on branch-, country- and world market level, implying that each person has to take their own full responsibility of the consequences of buying this particular stock.
Do your own due diligence !
2007 price target CAD 7.65-9.65
Khan Resources (KRI) is a uranium junior company focusing on a historic russian mine in Mongolia. Their CEO is said to be one of the best in the uranium business with over 40 years of world wide mining experience. Khan has at least a 32 million pound share (58 %) of the indicated NI 43-101 compliant uranium resource at the Dornod Uranium Properties. That is good enough for over 10 years of mining, but there is a potential for more, e g by buying out one of the minority owners, and also by further exploration on a property 100 % owned by Khan. Over USD 150 million was invested on the mine by the former russian owners.
There are around 58 million fully diluted KRI shares, but as usual I calculate with further dilution, in this case to 70 million shares.A USD 80 long term average uranium price is assumed. Total costs when the production has commenced are assumed to be USD 20 per pound of uranium produced, with low taxes at 25 %.
With an assumed Khan Resources 58 % share of a 2010 production potential of 4-5 million per year at the Dornod Uranium Properties, thus implying 2.3-2.9 million pounds of uranium for Khan, earnings after taxes would be (2.3 to 2.9) x (85-20) x 0.75 or around USD 112 - 141 million, corresponding to around CAD 1.76-2.22 per share (with USD=1.1 CAD). A reasonable p/e-ratio of 10 imply a 2010 KRI stock potential to CAD 17.60-22.20. My discounted KRI price target for 2007 is calculated with a yearly 25 % interest rate, very high due to the high risk, which results in CAD 9-11.35. The interest rate corresponds to a total 40 % risk discount compared to a calculation with a 10 % interest rate. It could be interpretated as that the expected value of the 2011 potential 3 million pounds uranium production is 32 % lower or just 1.6-2.0 million pounds per year in a probabalistic point of view. Therefore the stock price target is cautiously riskadjusted.
Due to an assumed high political risk in Mongolia I deduct another 15 % more from the calculated stock price to get a 2007 price target of CAD 7.65 -9.65 for Khan Resources.
Khan is also involved in a legal matter with a former director who has tried to transfer Khan assets, most likely in an unlegal way, from the company. The final outcome of this though is a matter for the courts to decide which could take some time, but I doubt this risk will materialize in anything significantly negative for the Khan Stockholders, even if you may not be 100 % certain of that now. So far the courts have decided in favor of Khan against the former director. If the long term uranium price average 2010-2019 will be expected to stay well above my current USD 85 calculation assumption , the stock price potential should be adjusted upwards accordingly, and vice versa.
Anyone with other input data can, as always, change these figures easily and do their own rough, simple and I think very useful calculations for an absolute and relative stock valuation purpose.