RE:Project ValueThanks
Now add the fact to your model, as stated in the technical report, that if the amt of KCl that is brought up, increases, then cost of production goes down significantly. guess $20- 30 per ton per 1% of KCl increase. curent 8% - suggested increase potential 10%
No i don't think that they current management is trying to do highway robbery from exsiting shareholders. </sarcasm>
RoadHouse wrote: Lets try again with the table ... more hopeful.
It is idiotic to value the project at effectively zero.
The project has to be valued based on the long term price of potash. Nobody knows what that is. Therefore, it has to be done on a probablistic model. Otherwise, each time oil fell below $60 all of the directors of the oil sands companies would write their projects down to zero and sell all of the assets to their friends for $4.1 million and claim the company got a good deal. Just like oil, the price of potash is going to be volitile.
The table below is based on the sensitivity analysis from page 215 of the Technical Report. It assumes that for each $48 fall in potash price the value of the project will fall by $498 million, which straight from the sensitivity analysis.
You will note that potash prices are currently CND$384 (US$315).
Feel free to criticise my model but I can assure you that the directors and their accountants cannot possibly justify the model they used, unless it is on the basis that it was suggested by one of their friends.
| Potash Price | Discounted Cash Flow Model | 10% Probability |
| 528 | 2192 | 219.2 |
| 480 | 1694 | 169.4 |
| 432 | 1196 | 119.6 |
| 384 | 698 | 69.8 |
| 336 | 200 | 20 |
| | | 598 |