Promotion of NAU – Project valuations2 x Anders (Chairman of the Board, Hvide + Vice President Investor Relations, Antonsson) are arriving in Toronto tonight and will meet investors there the rest of this week. Maybe the enthusiasm of some potential new investors will be a bit muted if they are under influence by some profiled and disappointed current shareholders making postings on bullboards which can be perceived as a light warning against investing in NAU. Here is an example from a Norwegian bullboard (known for much spam postings) recommending shorting of the NAU-share: “The amateurs threw themself on the message (i.e. DFS update), and on the Canada bullboard (i.e. stockhouse.com) the wine club yap about poor share price and management. Thus, nothing is new under the sun .. My short was built on NOK 16.70.” On the other side, one of the best NAU ambassadors on bullboards is inv4life who is posting relevant information about NAU and the industry on a few Scandinavian bullboards and on stockhouse.com. Her efforts on a couple of Swedish bullboards are admirable.
The outcome of the DFS update on May the 18th regarding initial CapEx and OpEx for Kaunisvaara was in line with expectations. According to the Q1’11 report released May 16th, about 60 % of the planned initial CapEx at that time was committed. It’s expected that contracts for the rest of the civil works including buildings in the processing plant area will be signed soon (during Q2’11). When those contracts are signed, it’s expected that about 80 % of the planned initial CapEx are committed (or “locked in”). The lead banks now are in process with syndicating the rest of the senior loan package of USDm 225, and it’s expected that the package is in place during Q2’11. Then it looks like the planned initial CapEx for Kaunisvaara is fully financed. 80 % commitment of planned initial CapEx (which reduces the risk of cost overruns substantially) and a fully financed project represents a major derisking of the Kaunisvaara project.
The DFS is built on sale of 1.5 million tonnes of iron ore concentrate in 2013 and 2.5 million tonnes in 2014. My impression is that the management has an internal ambition to try to achieve a bit more in 2014, about 4 million tonnes – which will contribute positively to the cash flow.
In the Q1’11 report NAU announced that the company expects to announce a NI 43-101 resource update during Q2’11 for a “Satellite” to Hannukainen, i.e. Cu Rautuvaara (maybe grades of iron, gold and copper similar to another “Satellite”, Kuervitikko). There can be more focus on Hannukainen going forward because a DFS for Hannukainen & Satellites is expected by the end of 2011. DCF will improve a lot if the annual production of iron ore concentrate is increased to 3 million tonnes a year as hinted several times by NAU (from 2 million tonnes in the PEA from 2010). Maybe a Finnish port (for example Kokkola, connected by rail from Kolari to Kokkola) is the most realistic for shipments of iron ore from Hannukainen. My estimate of DCF for Hannukainen & Satellites is about USDm 600 (post tax).
A DFS for Pellivuoma is expected during Q3’11. My estimate of DCF for Pellivuoma is somewhere below USDm 100 post tax). Maybe NAU will announce a resource update for Pellivuoma early in Q3’11.
My updated assessment of fair value of NAU as per mid-May is NOK 20.50. I also have assessed todays share price of NAU compared to a few peers. If the share price today was NOK 20 (it actually is NOK 15.40), then the pricing would have been better in line with those few peers.
As I understand it, NAU expects about 30-40 analysts and investors to visit the mine areas and NAUs presentations in Pajala during June 7-9, 2011.