Numbers...Let us not be too dire here...
For the moment, and for the sake of argument, let's assume:
1. 500,000,000lbs moly at average grade of 0.06%;
2. this would equal 1.344 lbs moly /tonne (2240lbs);
3. which give us roughly 372,023,809 tonnes of ore;
4. $4/tonne profit over the life of the mine (anyone know what the Endako average has been?);
5. which would give us a $1.5 billion net resource/reserve;
6. discounted to 10% given long mine life (I will try to look at more detailed NPV calcs when I get home, but its complicated when you get into long mine life), which is $150 million. remember I have just discounted the assumed profit to 10%, not the gross value;
7. we have 150,000, 000 shares outstanding.
That's still a possible $1/share buyout, unless my assumptions or calcs are serioulsy flawed, based on these numbers.
Is the $4/tonne profit over the mine life conservative... I would say yes, but I think it gives a nice 'bottom' valuation assuming we can get the 500 million lbs of 0.06%. Let's not also foregt the capital costs, which is why I kept the profit per tonne low. Some of you are now talking 800 million lbs, but I'll stick with 500 million for now for the sake of conservatism.
I will point out, however, that at an average grade of 0.06% moly/per tonne, our profit would actually be $8.80 at $14/lb moly on 100% recovery (not possible)..., With recovery at 85%, for example, this would 1.14/lbs moly per tonne with a profit $6/tonne at $14/lb moly.
Want to lower the average grade? Okay, let's look at it another way...
Let's say average 0.045% average grade of 500 million lbs moly, which is 500 million tonnes ore. Let's also assume only 85% recovery.
1lb/tonne * 0.85 = 0.85lbs/ tonne, * $14/lb = $11.9, - $10 extraction cost = $1.9/tonne ,*500 million tonnes= $950,000,000 net reserve, discounted again to 10% due to long mine life = $95 million NPV, /150,000,000 shares is 63 cents/share buyout value.
So, according to these 'for argument's sake' numbers, even with a reserve of 500 million lbs of 0.045% moly , and $14 moly, that still values us at 63 cents/share, assuming 85% recovery, $10/tonne extraction cost, and 150 million shares, excluding capital/start-up costs... And we know that LWC, or its owner, is not going to build a roaster when there is one 18km away... Which leaves only the mining equipment.
I will say, however, that we also have to factor into our mining costs the transport costs from Nithi to the Endako processing facilities.
Feel free to trash or come-up with alternative interpretations or valuation examples.
Regards,
B.