YourFriendo wrote: Here is an old post from Contrarion that shows how good he is at investing in Sherritt:
My favourite part of his grossly incorrect analysis is this gem:
"
For example, at $8 nickel (all other assumptions the same) the implied share value is $4.36 and at $9 nickel the implied share value is $5.50." Well we are essentially at 9$ nickel, and the stock is at $0.36....not$5.50
Very Rough Sherritt Cash Flows Annualized (Update)
Assumptions: Nickel price $6.50 USD, Moa Production 35,000,000 lbs, NDCC Moa $2.00 USD as guided. Power Cash Flow $32m (same as 2017). No cash flow from Ambatovy. No cash flow from oil & gas division.
Moa
35,000,000 X ($6.50- $2.00) = $4.50 cash flow per lb
35,000,000X $4.50 = $157.5m USD or $205m CDN cash flow Moa
Subtract
-$47m annual debt service obligation
-$52m Moa capex
-$23m head office/corporate costs
= $83m net cash flow
$83/10* cap rate = $830m equity value
Add Power Cash Flow
+$32 /15* cap rate = $213m equity value Power
--------------------------------------------------------
$830m + $233m = $1043m total equity value
$1043/400m approx shrs out = $2.61/ shr implied share value.
* I used a 10% cap rate for Moa JV cash flows and 15% cap rate for power cash flows to differentiate the risks in the way the cash flow streams work. With Moa JV the cash flows are paid by the JV to the partners. With power cash flows, the Cuban gov't pays Sherritt.
Of course, all other things being equal, with improving nickel prices the net cash flows and resulting implied equity values ramp quickly.
For example, at $8 nickel (all other assumptions the same) the implied share value is $4.36 and at $9 nickel the implied share value is $5.50.