RE:determining the NAV in certain terms“ZEN is poised to become one of the few natural graphite producers to sell
into the premium synthetic market, at a cost structure that is 70-80% lower
than synthetic. While ZEN does not have an updated NI 43-101, we anticipate
one by Q4’13, and expect a steady flow of catalysts thereafter. As a result, we
initiate with a Buy rating”
Above quote by Roth Capital Partners, 26 April 2013, issues Buy Target
$4.00 based on 0.4x P/NAV multiple and
a resource 13 MT at 5% (just starting East Pipe Drilling)
Roth has since revised it’s P/NAV calc’s in Sep, on the better than expected East Pipe Drilling results and outlook for increasing resource in the West Pipe. Price Target raised to
$6.00 (0.4x P/NAV) but now based on a
conservative resource 23 MT’s at 4.0%. (What will Roth’s Target be for P/NAV, using 80MT at avg grade 3.0%, 2.4MT’s pure Cg that will guarantee 20+ year minelife at 100 KT’s/year production, then factor $10,000 to $20,000 / tonne)
Original Roth recommendation:
https://roth2.bluematrix.com/sellside/EmailDocViewer?encrypt=217db938-01aa-410b-8166-bc88a30537f5&mime=pdf&co=Roth2&id=morningcallmin@roth.com&source=mail&pdfFileExtension=.pdf
Assumption – Resource ranging from low 60MT’s to 100 MT’s on the high end.
TCC Calculation – ((Tonnage ore) x (average grade) x (average expected revenue/ton) x (Value Multiple %))/Shares OS = P
- Avg Grade and Tonnage = Resource Estimate
- Avg Revenue/Tonne = University Studies/End Users
- Value Multiple = Initial RE/Uni/EndUse = PEA
Roth Estimates – Target Price now $6.00/share based on 23 MT’s and Avg Grade 4%
- $4 on 13 MT’s (May ’13) (13M tons x 5% x $8000/ton x 5.7% VM )/74.1M shares = $4
-$6 on 23 MT’s (Sep ’13) (23MT x
4% x $8000/t x 5.7%) /74.1M shares = $6
TCC Estimates
- ( 60M tons x 4% x $3500/ton x 2.0-4.0%)/60M = $2.80 to $ 5.60
( 80M tons x 4% x $3500/ton x 2.1-4.2%)/60M = $3.92 to $ 7.84
(100M tons x 4% x $3500/ton x 2.2-4.4%)/60M = $5.13 to $10.27
(120M tons x 4% x $3500/ton x 2.3-4.6%)/60M = $6.44 to $12.88
(140M tons x 4% x $3500/ton x 2.4-4.8%)/60M = $7.84 to $15.68
My Estimate $7.75 (Avg Grade
3.0%, Tonnage 60MT, $5k/t, VM 5.0%, 58m F/D shares)
- (60MT x 3.0% x $5000/t x 5.0% VM) /58M = $7.75 Conservative
- At 2.0% Avg Grade at $5.17
Tonnage 100MT and Price/tonne $8000
- (100MT x 3.0% x $8000 x 5.0%) 58M = $20.68
- At 2.0% = $13.80
Roth nailed the potential in April, the numbers do not lie, we just need official confirmation in the RE this month, cheers, Mark