RE: MOL now the best value in the sector?As many here know I am long MOL. I rode the first wave up from $1 then sold too soon only to rebuy in the summer plunge. I think this stock is a slam dunk long term. I wonder why you have changed your tune so dramatically Calif?
From your sept 25 post you don't sound so optimistic yet very little material change has changed in this time span. The only news worthy thing is the rock chip sampling program for the iron ore yet you and I know that rock chip sampling is far from an accurate indicator and the drills need to turn to assign any valuation other than it looks good :) I am wondering why your change of heart? You probably know that I respect your posts (even though I disagree at times) yet I find this reversal truly puzzling.
Here is your sept 25 post
The headline IRR/NPV is ok. But it's the details that are the devil.
They
are assuming $31.80 moly to start, ramping down to $13.80 in 2016. With
three other big mines coming online almost the same time (Ruby Creek,
Climax and Mt Hope) that bring ~100MM lbs of new production into a
400-500MM lb market, I think their price assumptions are very
aggressive. And then there's Malmjberg that is coming with another 25MM
lbs in '11 or so.
With A$1B capex, they needed to use those
early high price assumptions to make the numbers work. And what are the
odds they can bring Spinifex into production in July '09? I give them
zero chance of meeting that schedule. Spinifex will be lucky to make it
into production by 2010. Name the last $1B mine that came in on
schedule (or on budget).
I think MOL is guilty of using rosy
price assumptions and aggressive production time lines to make the
numbers work. Where's a sensitivity analysis using lower price
scenarios? At the very least, I'd like to have seen the numbers run
using "Study 1" so as to judge the sensitivity to high early prices.
(Study 1 is much less optimistic about prices).
I find the lack of a sensitivity analysis very telling...