RE: New Lead Target-GMThank you GM for your corrections and additions. I must have been typing my response to hedgefarmer when your post came thru.
So now:
1. 75K tons production is ok estimate(some have advised me 70K to 90K range and I took the low end, to be conservative)
2. Concentrate not equal to pure lead ingots. I suspected this but this correction helps 'refine' the estimate, LOL.
N.B. factor in reduction of sale price from $1100./ton down to
$935/ton/US.
3. .18 cents per pound opex/US$, but premium for IVW/Magellan lead quality, up to 5 cents/US/Pound. This was NOT included in my estimate.
4. Expenses in Aussie dollars. This has been touched upon in previous discussions. My take is that Canadian dollars and Aussie dollars will continue to rise in value against falling US dollar, maybe quite rapidly and soon, but I'll assume on a roughly equal footing, as both are resource based economies. Open to discussion.
So, 75K tons @ $935/ton = $70,125,000 gross annual sales, first year of production.
But, add back in 5 cent premium/per ton for quality concentration from Magellan, so:
$1100/ton x 85% = $935/ton and add back $100/ton(5 cents pound) =
gross price sold of $1035./ton
75K tons/equivalent @ $1035/ton = $77,625,000 gross sales, first full year of production.
Deduct 18 cents per pound cost of production/opex = $360/ton.
So, net per ton pre-tax profit = $675/ton.
$50,625,000. net, divide by 2 for Sentient share = $25,312,500. IVW
net pre-tax profit.
Divide by 60million shares outstanding(does this include warrants?)
Comes to 42 cents per share.
7x EPS/share low end of industry standard valuation range = $2.95 US$/share.
Or, $3.69 Canadian at 1.25/1.00 exchange rate.
The earlier estimate based upon $900/ton US$ of around $2.80 sounds agreeable with this calculation.
It is the expected bump in price of lead, from the earlier estimate of $900/ton to $1100/ton, that brings the amount upward.
Still sounds good to me, and remember, the market may reward a premium to the only new lead production resource in many years, along with the anticipated 'China Premium', as the Orientals continue on their resource acquisition binge.
All in fun, but thought it was time to revisit the process. Thanks for the guidance, and anyone else fell free to jump in, tear apart and reassemble, please.
vocex1
1/2 Sentient share deducted leaves $38,812,500. net pre-tax profit to IVW shareholders.