End November Nears Will the Market be happy with 3 mil tonnes pure graphite this week?
My range estimate (40MT East at 4%, 60MT West 2%)
80MT at 3.0% = 2.4 MT’s = 21.6 years Minelife (less 10% Production Loss)
to
100MT = 3.0 MT’s = 27 years***Minelife
The RE answers many questions Tonnage, Avg Grade, Longevity of Mine but Value/Tonne will be outstanding
3MT’s Pure Graphite x $7000 profit = $21 Billion In-situ Value, discounted to 5% = $1.05B /55M shares o/s, supports a possible Take-out SP = $19.09 (long way from todays $3.10)
At Production, assuming 100 KT/yr, $7000/t Net
Profits: ($8000/t – AISC $1000) $7000 x 100,000 t/y = $700M/yr for 27 years
Roth foresees a Capex $170M, IMO after RE we’ll see a SP $5.00+ and will add $80M to Capex for additional contingences (Capex $250M at SP $5.00 = Finance 50M additional Equity shares for 110M F/D)
$700M Revenue less taxes (40%) / 110M shares = $420M / 110M sh = $3.81 EPS
Apply a 10x Multiple to Earnings (over 27 years) supports a shareprice = $38.10 (long way from todays $3.10)
Roth’s May/13 Report had a SP Target $4.00 based on 13MT at 5% Resource (then $6.00 for 23MT revised at 4%) long way from todays $3.10!
My Conservative Price Target is $7.50 after the new RE of 100MT Resource at 3.0%, with a 27 year Minelife conclusions, but concede any Take-out Offers could easily near $15-$20 /share based on In-Situ and Earnings metrics tba! (determining factor will be value/tonne)
Cheers, Mark