RE:RE:determining the NAV in certain termsWhat is the VM% Value Multiple?
"Roth nailed the potential of ZEN in April"
Value Multiple VM% = Confidence in the Project (RE, Tonnage/Grade, Purity 99.97%, Synthetic Characterisitics [Rev/tonne], PEA, Feasibility(s) etc)
The (VM%) (1-10% based on a ‘balanced scorecard’ weighing all other quantitative and qualitative information at hand) is also subjective.
Roth makes a lot of assumptions in their report , but generally, their 40% of NAV @ $9.92 per share based on (their guess of) 74.1M shares implies a certain VM% :
(13M tons x 5% x $8000/ton x Value Multiplier )/74.1M shares = $4
So the insitu VM they are implying into their target price is: 5.7% which is middle of the 1-10% expected range, but then they are assuming $8000 revenue - $1500 cost=$6500gross profit/20tons = $325/ton ore. That’s like a gold producer being able to access open pit ore with 15g/ton gold.
That’s a lot higher than I will use in the following calculations, but it shows you that the 2-4% VM starting point I have used in the past is quite conservative because the larger size of deposit means a higher VM would be appropriate. Honestly, at this point fair value would be way closer to a 5% VM than 2%. In a buyout, 8-10% is possible. And not only is the 2-4% VM% range I start with in the below numbers conservative, I’m going to go with a ‘floor price’ for Zen’s graphite too, because (until next week?) people can’t yet put faith in bigger expected revenue numbers.
$3500 should be seen as a sub-floor type price.
((Tonnage ore) x (average grade) x (average expected revenue/ton) x (Value Multiple %))/Shares OS = P
( 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
Not that these implied values are big enough, but the metallurgy, once it's well understood, might double or triple these numbers. That's all. But for sept and october, I'm in the 'tonnage' camp.
IMO 80-100MT at 3%, $10,000-$20,000/tonne, 100M shares by production, VM of 5% for my RE
The Range for RE,at 80MT, $10,000/t = $12/share (VM 5%, 100M shares)
100MT at 3%, $20,000/t = $30/share (VM 5%, 100M shares), this is why the RE is so important as seen in my price/share ranging from $12 - $30
Cheers, Mark