Mercator Minerals Ltd MLKKF

RE: ML is Undervalued

[24~Karat]

Bjorn, This paragraph from my previous post today (that quoted Mineweb) goes a long way towards answering your question about ML’s undervaluation. “…the huge rises being seen in construction costs for new facilities are leading to delays and financing difficulties, in particular as most major new copper projects are for high tonnage, low grade mines where project costs in the $1billion + level are more the norm than the exception.” So there it is. It jumps right off the page. The replacement-cost value for ML’s infrastructure is $ 1 Billion. One noteworthy distinction, however, should be made between ML and the other mine development projects. The Billion dollar project cost that is cited for a typical mine is for a “high tonnage, low grade mine”. But Mineral Park, actually, is a high tonnage, high grade mine, when you take into account the richness of its molybdenum byproduct, and also when you factor in the economics of its unusually low stripping ratio. The second element to the valuation formula is the discounted NPV of ML’s mineral reserves. Certainly, $500 million is a severely discounted number for Mineral Park, but we’ll use that number, just to be conservative. The next step would be to tally those two numbers, which would equal $1.5 billion, and then to back out ML’s debt of $0.15 Billion, and that provides ML’s current value of $1.35 Billion. Divide that by the fully diluted number of shares (the exercise of which would also raise a substantial amount of additional cash) and that would imply that the current value of ML’s common stock is $16.875 per share. With sustained high commodity prices, that value will see itself increased over the years, as the market further comes to appreciate the earnings power of ML.