Please help! My conservative calc come to $96 per share. WTF Please help! What am I missing?
Forget 50mt of production pa.
Forgot even 23mt production pa.
Forget the current potash / MOP spot price of US$1,250.
I just wanted to do some rough thoughts on near term achievable production rates. Also using a sensible potash / MOP price.
So simple inputs:
- Production rate,13mt (this is the planned installed production rate that has already been announced with Plant 3 in the pipeline. This rate accounts for roughly 10% of the Brazilian market. Very achievable).
- Price for a tonne of basic Verde product, US$90 / C$117. I’m taking this as a CIF price. i.e. Verde must pay cost to transport product to farmer (this price is taken from today’s announcement, modelling out a long term reference price. This price is a 70% discount of today’s spot price)
- Transport cost for Verde to ship a tonnes of produce to farm, C$55 (for the last number of quarters this cost has been around C$40/45 per tonne. So increasing the cost to be conservative).
So:
- Operational revenue pa = 13mt production x (sales price C$117 - transport cost C$55) = 13m x 62 = C$806m net revenue pa.
- To get to a valuation, what revenue multiple should be applied? For a mature mining business you can normally value off a x3/5 multiple. But this is a growth company, with an almost infinite resource, growing to 50mt? To be conservative let’s use a x6 multiple. So valuation is 6 x C$806m = C$4.8bn
- So value per share = val C$4.8bn / no. of shares 50m = C$96 per shares.
So:
- using currently planned and announced production capacity
- using a sensible long term product price (70% discount to current spot)
- capex modest and achievable
- no uplift for high value products, BAKS etc
- modest growth multiple to size of opportunity
- value per share coming to C$96.
- WTF !! Please help. What have I missed? C$96 per share!!!!!!!!