DM 60%in $6b TW=3.6b= 26/sh At35%=15/sh SHORT STORY
1.Twin Metals ( TM) at 80kt/d will have 1/2 ANTO rev ,so, should have 1/2 of $ 12 b ANTO cap = $ 6b
ANTO P/S = 2 .Applaying same P/S to TM = $ 6 b cap
2. the sale of 25% TM at price of 25% NAV at the time of FS will easy cover DM 35% capex .
3. final (CARRIED FREE) 35% stake in $6 b TM= $2.1 b = $ 15 per DM share
7 bagger but very long wait for it.
LONGER VERSION
Redmetal wrote : " At $4 copper $9 Nickel and $1200 PGM, total revenue of around $3 billion per year."
80,000 tons a day equals yearly production as follows:
Copper: 400,000 million pounds
Nickel: 80 million pounds
PGM's: 500,000 ounces
Cu equiv more than 700 m lb ,
ANTO did 640m lb Cu in 2011 + other stuff to a rev of $ 6 B
The main news is the doubling of Mill capacity to 80 kt/d from 40kt/d
1. SIMPLE VALUATION .... multiply previous data by 2
Their June 2010 presentation shows base case with Cu price = $1.75
Au price 600 Ni $ 12
Today Ni is 28% lower ,Cu is 350% higher , Au is 250% higher .
So, it is OK to follow case between base and Jan 2008 market prices case .
The brown numbers in table on page 10 of that 2010 presentation @ 40 kt/d
It says :
NPV = 16.3 b so now will be 32.6 b
10% NPV = $ 3.9 b so, now will be 8b
Cash flow was 840m so, now will be 1. 68 b More because of economy of scale Say $ 1.9 b
IRR 35 .5 % - now say 30%
The multipied by 2 prod from that table now is :
-- 362 m lbs Cu
-- 84 m lbs Ni
-- 500 k ozs TP
CAP OF ANTO IS $ 12 B @ SHARE PRICE 25% BELOW 2011 TOP
at low P/E of 6.7, rev = . $ 6 b , P/S around 2 , EBITA $ 3.7 B ,earnings $ 1.3 b
How much will be the 25% of JV NAV at the time of FS , ANTO will pay to DM?
NAV should be higher than NPV but I will take what I have here = NPV
1/4 FROM 32 B NPV= 8b ( $ 58 /DM share)
That's impossible , or is it ?
So, I'll take only the $ 8 b of 10% NPV ( at FS time more appropirate will be 5% NPV = say ,$16 b )
1/4 of it is $ 2 b ( $ 14.5 per DM share)
700% from now .
$ 2 b will be twice as much as DM will need to cover it's 35% of capex .
Means , no dilution , no debt and hundreds of $$ millions in cash
Even if ANTO will pay for that 25% less than $ 1b ...it looks they will pay more than enough to cover DM portion of capex .in any case .
In addition to that $ 1b or $ 2 B cash = $ 7.2 to $14.5/sh , DM will end up with 35% of TM =$15/sh
No matter where stock speculators will trade DM in between: , 20c or $ 20,
(looks, they keep DM for now in 50% range $ 2 - 3 )
it should end up at min $ 15/sh and certainly at more than today's ridiculous $2.2
So, those who bought below $ 4 should never lose , given enough time and patience .
and barring unlikely case when TM will never, ever get a permit .
If it is extremelly unlikely I will lose on DM at today's price ... so how much I can win ?
double?
triple
quadruple
..what about 7 times ?
you tell me .
The going every day lately dumping of 20k shares at 15:59 hrs and 9:31 hrs
(which is like 1/2 of daily volume ) to push the price down , will stop sooner or later .
Maybe it stopped today on 10% reversal from strong 1.5 Y horizontal support at $ 2.
If PPS reversed from $ 2 to a top of range ...4 times in the past ( 2 times back to $ 3 and
2 times only to $2.7 because of selling at that price Farnconians ) ...
today's reversal seems real and , as in the past cycles ,should last a month or two.
If there will be no significant news .
But in a month there will be very significant news: AT LEAST 50% higher resoure announcement ( can be as much as 70 % more )
with likely 100% higher NPV.
So, this time DM can break up from that range , on the way to above $ 4.
There is also not many "Franconians " left who were selling " whenever PPS hit $ 2.7 - their conversion price.
Only negative is long wait.
But there is also a possibility of lower return ( just 100%) in shorter time.
That scenario is takeover of DM at say, $ 600m = $ 4 before FS time .
Why would ANTO pay $ 1 b for 25% stake if they can have whole 60% by buying premeturely whole DM for 600m? ( 100% from here) That's like $ 1.5 b savings. for them .
If price will be good enough ( IE $ 6 ) , DM can agree to a change of previous contract for the sake of having less money but years earlier .