$300 / ton ok for AAAIn the worst case scenario...potash drops to $300 per ton...it is important to know if your company can still make earnings per share?..The major factor in determining this is amount of debt and cost of servicing that debt..and the ability to secure long term supply for your product..
Allana is ok...better than most...and fortunate for us...BHP can change the "rules of the game"...
Allana Potash:
AAA is not planning on a share offer for 1.5 – 2.0 years from now, and after BFS completed, NI Resource Estimate completed, and all Debt Financing in place for the 60% planned debt load. Estimate $3.00 per share at time of share offer to Liberty, IFC and other “Strategics” = $320m / $3.00 per share = 106 m new shares. Total shares at time of production near 315m shares of AAA.
Debt servicing: 60% of $800m total capex = $480m debt x 7% interest per year = $33.6m + $33.6m principal pay down per year = ($67.2m) debt per year
$300 - $90 opex = $210 net operating income x 1 m tons KCL per year = $210m – 30% taxes/tariffs/royalties = $136.5m net - $67.2m debt servicing per year = $69.3m free cash flow / 315m shares = 0.22 cents EPS x 10 times forward earnings = $2.20 per share AAA.
Assume NI Resource estimate doubles measured and indicated resource to over 1 billion tons by March 2012. Assume Ercosplan revises mine production from 1 m tons per year for 50 years of mine life up to 2 m tons per year with a 45% extraction rate for 50 years of mine life. The projected share price doubles (with all ratios remaining consistent as shown above) from $2.20 per share to $4.40 per share AAA
Allana makes money at $500 per ton or at $300 per ton potash...