Some thoughtsThis is an attempt to determine Victory’s earnings atMinago assuming various conditions including a 7%, 10 year loan, paid annuallyfor their production plant.
Also using base case from DFS for Victory Nickel which uses the Nickel priceat US 11.19 per pound and 1.0 US $ = 1.097 Can $. Presently Nickel is about US$11.19 with indications of continuation.
The process per the DFS includes milling of ores andsending concentrate metallic by-products for smelting and refining at furthercosts to company. Company also has Frac Sand which is used by the petrochemicalindustry to enhance flows of oil and natural gas.
New HydroNIc process Plant if feasible will add (myestimate) Can $65 million to total plant costs bur cut transportation, smeltingand refining costs of US $1.94 to (my estimated) cost of US
.53. My estimates can be off???
Company will produce average of: 24.33 million pounds ofNI annually based on the DFS.
I’m figuring company will have 360 million shares at dateof production, about 33 million more than she now has.
Above are my present assumptions and data from the DFS –please be free to indicate your own assumptions and indicate errors found inthis study.
Condition1,finding the cost per pound of nickel produced with the Can $596 million loan atthe rate indicated above.
Condition2,Finding the cost per pound of nickel produced with the plant having theHydroNic Process installed for Can $65 million in addition to the Can $596million loan at the above loan rate while producing the same amount of nickel.
Condition3,similar to Condition 1, but Victory with a smaller stake in the project, say80%.
Condition4,similar to Condition 2, but Victory with the 80% stake in the project.
Factorfor 7%, 10 year loan paid annually is 0.1423775, say 0.1424
LOANEXPRESSED IN POUNDS OF NICKEL PRODUCED IN US $ FOR:
Condition1
(596/1.097)(0.1424)(1/24.33), or US $3.18 per pound ofnickel produced
Condition2
(596 + 65/1.097)(0.1424)(1/24.33), or US $3.53 per poundof nickel produced
Condition3
3.18(0.80), or US $2.54 per pound of nickel produced
Condition4
3.53(0.80), or US $2.82 per pound of nickel produced
COSTSPER POUND OF NICKEL PRODUCED AFTER BY-PRODUCT CREDITS US $1.94 includes mining,milling, infrastructure, general and administration, concentrate transportation,smelting, refining and by-product credits from other metals and Frac Sand
Applicable to Condition’s1 and 3
US $1.94 per pound of nickel produced
Applicable to Conditions2 and 4
Decreased transportation, smelting and refining cost ofCan $1.99 by 80% for efficiencies gained by HydroNic Process Plant
1.94 – [1.99 – 1.99(0.20]/1.097 or US
.53 per pound ofnickel produced
COSTOF POUND OF NICKEL PRODUCED CONSIDERING DEPLETION AND DEPRECIATION
Combined depreciation and depletion, expressed in US $per pound produced. Used US 0.50 for depletion and Can $400 million over 15years for depreciation = depletion of 0.50 + 400/(1.097 x 15 x 24.33), or US$1.50
TAXES
Considering capital and exploration expenses I assumethere will be no tax for several years
Annual profit per share for various conditions, assumingVictory has 360 million shares outstanding at production.
[Base price of nickel – (Loan costs in pound nickelproduced + Cost to produce pound nickel with by-product - Or by-product +HydroNic Plant + depletion and depreciation + (zero tax)] x (pounds of nickelproduced/outstanding shares) x (Conversion to Canadian $) = Earnings per shareCanadian.
Condition 1
[11.19 – (3.18 + 1.94 + 1.50)](24.33/360)1.097= Can
.34share
Condition 2
[11.19 – (3.53 + 0.53 + 1.50)](24.33/360)1.097= Can
.42share
Condition 3
[11.19 – (2.54 + 1.94 + 1.50)](0.80x24.33/360)1.097= Can
.31 share
Condition 4
[11.19 – (2.82 + 0.53 + 1.50)](0.80x24.33/360)1.097= Can
.38 share
Assuming the above numbers are correct and using PEratios of 10 to 15 we have big price change over the present Can
.14 pershare price. Do your own check…of the above.