Why is AAA Undervalued?It all starts to make sense kimosabee...
Your KRN has 80% of its resource as Sask. Carnalite...
Also very interesting, and staying to the facts:
KRN market cap = $358 m / 144 m tons of minable KCL = $2.50 per ton
AAA market cap = $244 m / 126 m tons of minable KCL = $1.93 per ton
the diference of 0.57 cents x 126 m tons = $72 m / 200 m shares of AAA =
0.36 cents per share lower for AAA
or
KRN has a market cap today of $358 million / 790 million tons of KCL (from their resource report) =
.45 per ton
AAA has a market cap today of $224 million / 673 million tons of KCL (from our resource report) =
.33 per ton
If you apply the diference of 0.12 cents per ton to AAA's resource, you get (0.12 x 673m tons) = $81 m or .40 cents per share. That means
AAA is trading .40 cents lower compared to an equal comparison to KRN based on actual reported resource.
And, in two months time with the revised NI Resource Estimate and in my estimation a double to the measured and indicated resource....we should be trading at with all things considered equal to KRN : (673 m tons M+I x 2 = 1.34 b tons M+I) x .45 cents per ton = $605 / 200 m shares =
$3.00 per share of AAA with revised NI Resource Report in 60 days..
AAA: NEW MEASURED AND INDICATED MINERAL RESOURCES OF 673 MILLION TONNES WITH CONTAINED KCL OF 126 MILLION TONNES Karnalyte Resources Inc.: 21 million shares outstanding: Market Cap. $358 million
The results for Proven and Probable Reserves are as follows: Based on the Technical Report, 144 million tonnes of potash product can be extracted and produced from the Project's reserves at 97% KCl and 90% plant efficiency, which suggests a project life of 68 years at a production rate of 2.125 million tpy.
I assume if KRN has to raise $2.0 billion total for capital for mine construction as stated in the NI Resource Estimate with a plan to ramp up to 2 million tons of KCL produced per year. One can assume 50% debt and 50% via shares. So, KRN would have to issue 50 m shares at lets say $17.00 per share and end up with 71 million shares outstanding
And assume $1 billion of debt = ($100 m per year) from net operating income every year
And assume $1 billion of company dilution = ($1.0 billion / 21 m current shares = $47.60 per share of KRN in dilution)....very very high and not likely to occur at $17 per share.
Further, KRN will have a lower amount of free cash flow because of having to carrying a debt load of $1.0 billion at 5% per year = $50 million interest per year + $50 million principal repayment per year = ($100) million debt payments per year. Or the equivalent of 250,000 tons of KCL
Athabasca Potash Sale: Example: $5.44 per measured and indicated ton of KCL x KRN having 144 m tons saleable = $783 million cap rate value / 71 m shares = $11.00 per share of KRN at time of production
| Proven Reserves | Mineralized Material
(million tonnes) | Average KCl Grade
(% KCl) | Mineable KCl Tonnage
(million tonnes) |
| Total Average Carnallitite | 261.6 | 18.7 | 49.0 |
| Total Average Sylvinite | 52.7 | 26.3 | 13.9 |
| Total | 314.3 | | 62.9 |
| Probable Reserves | Mineralized Material
(million tonnes) | Average KCl Grade
(% KCl) | Mineable KCl Tonnage
(million tonnes) |
| Total Average Carnallitite | 416.0 | 18.5 | 77.0 |
| Total Average Sylvinite | 58.3 | 25.8 | 15.0 |
| Total | 474.3 | | 92.0 |
In addition to the Mineral Reserves, the Technical Report provides an estimate of the "Inferred Resources". It cannot be assumed that all or any part of the Inferred Resources will be upgraded to an Indicated or Measured Resources due to additional exploration. Inferred Resources have not been considered in the FS as they are considered too geologically speculative.