Value of Lanquart & Dresdan Mills? As projected by Michael Irwin, before the PM1 machine was in installed in the Lanquart Mill and productivity improvements were made in the Dresdan Mill
We believe that Fortress Paper is a net asset value story, where the replacement value of the two mills and the related equipment is well above the company’s current market capitalization. The Lanqart Mill is situated in the town of Lanquart, 100 kilometres east of Zurich in the scenic Swiss Alps. After poring through the initial public offering prospectus, we discovered that the fire insurance value of the property was CHF (Swiss Francs) 66.5 million for the building and CHF 163 million for the inventory and equipment. At the current exchange rate this totals approximately C$200 million.
The Dresden Mill is located in the town of Heidenau, 12 kilometres south of Dresden on the Elbe River. The mill has total capacity of 36,000 tonnes and a 12,000 tonne machine costs approximately €30 million. Therefore, the total replacement value of three 12,000 tonne machines is €90 million or C$125 million. Additionally, the Dresden complex includes land, a hydroelectric plant, and a water treatment facility, which were appraised at C$50 to C$100 million combined.
Putting all of the pieces together, we believe that the company’s assets are worth between C$375 and C$425 million, compared to the current market capitalization of only C$86 million. We are not suggesting that the stock should trade at replacement value but we believe that a 75% discount to net asset value is excessive for assets that are both cash flow positive and profitable.
NOW ADD THE VALUE OF THE THURSO MILL!
Enjoy,
Nighthawk40