Unrisked DCF NOK 33 or NOK 43PART II: UNRISKED DCF NOK 33 (pellet feed 8 mtpy) or NOK 43 (pellets 5 mtpy + pellet feed 3 mtpy)
Below is my derivation of unrisked DCF as per Dec. 31, 2010.
Conclusion:
· Unrisked DCF is NOK 33 per share fully diluted for future share issues for pellet feed production of 5 mill. tonnes per year in Kaunisvaara and 3 mill. tonnes per year in Hannukainen plus by-products from copper and gold in Hannukainen. · The unrisked DCF increases to NOK 43 per share if NAU does invest in a pellet plant to produce 5 mill. tonnes per year of iron ore pellets from 2019 in addition to 3 mill. tonnes of pellet feed plus by-products from copper and gold.
1387 Subtotal from above (i.e. Kaunisvaara and Hannukainen area)
+ 170 Net provenue from share issue mid-2012 for CapEx for Hannukainen...56 mill. shares
= 1557 Unrisked DCF for pellet feed production 8 mill. tonnes per year fully diluted for future share issues….290 mill. shares
--> USD 5.37 or NOK 33.30 = Unrisked DCF as per Dec. 31, 2010, per fully diluted share (= 1557/290*USDNOK 6.20)
+ 439 Unrisked additional DCF from potential production of 5 mill. tonnes per year of iron ore pellets from 2019 instead of former production of 5 mill. tonnes of pellet feed after investing in a pelletsing plant
= 1996 or USD 2 billion: Unrisked DCF as per Dec. 31, 2010, for pellet feed and pellet production
--> USD 6.88 or NOK 42.70 = Unrisked DCF as per Dec. 31, 2010, per fully diluted share (= 1996/290*USDNOK 6.20) for annual production of 5 mill. tonnes of pellets and 3 mill. tonnes of pellet feed
The unrisked DCF per share increases every 12th month by a portion equal to the discount rate, i.e. by 8 % p.a. real rate or by 10% p.a. nominal interest rate if general inflation is expected to be 2 % p.a.
In my scenario I expect a new public funded railway from Svappavaara to Kaunisvaara and eventually extended to Kolari on the Finnish side open for traffic during 2017-2019.
My modeling assumes a long term reference price for 62 % Fe CFR China of USD 100/dmt.