Post by
bendystock on Feb 15, 2016 5:52pm
RMC High Grade Worth $8.28 based on FCX Morenci Sale
My estimate puts the value of RMC's 25% share of the Timok Project high grade discovery at $424.9 million or $8.28 per share - these are USD.
This estimate ignores that RMC most likely has a large porphyry asset at Cukaru Peki, still has potential to increase the high grade at Timok and has other properties still waiting for discovery.
Freeport sold 13% of its stake in the Morenci mine for $1 Billion USD.
For someone with the required qualifications I think that they could get a good estimate of RMC's current value based on this sale.
I gave it a try for fun, lots of rounding and certainly not an expert analysis, oddly my results come to the same conclusion as I have heard from Brent Cook and Adrian Day that RMC is worth over $8 per share.
Morenci Deposit Estimate:
448 Mt at 0.48%
603 Mt at .51%
3.2 Bt at .16% (Bt = Billion Tons)
Total Tons - 10.3 MT (Mt = Million Tons)
FCX sold 13% of this (1.3 Mt) for $1 billion, I used this to come up with a suggested value per ton of copper reserve of $743.64.
Reservoir Minerals High Grade Deposit Estimate
65.3 Mt at 2.6% ignoring the gold
Total Tons - 1.7 Mt
65.3 Mt at 3.5% copper equivalent - includes the gold
Total Tons - 2.3 Mt
Taking the suggest value per ton of copper reserve $743.64 I used RMC's total tons including gold for a high grade deposit value of $1.7 Billion.
RMC currently owns 45% of the deposit but I expect that any sale would have considerations for FCX owning 75% by the end of a feasibility study so I used 25% ownership for the valuation.
25% of $1.7 Billion is $424.9 million.
RMC Shares Outstanding - 51 million fully diluted.
$424.9 million at 51 million shares is $8.28 per share.
Note that if I ignore the gold in these estimates and use 1.7 million tons instead of 2.3 Mt these numbers become $315.6 million or $6.15 per share.
Clearly I have ignored that Morenci is up and running but I have also ignored that RMC's deposit has lots of room to grow whereas Morenci's I think is quite well understood. Also ignored is that RMC's deposit right now is high grade only which I reason should have lower costs of production.
Hope you guys enjoy the estimates and that someone with more technical background is interested in taking these to a higher level of detail.
References:
https://www.bloomberg.com/news/articles/2016-02-15/sumitomo-metal-agrees-to-pay-1-billion-to-raise-morenci-stake
https://www.mining-technology.com/projects/morenci/
https://s1.q4cdn.com/808527891/files/technical_report.pdf
Comment by
psj567 on Feb 16, 2016 6:58am
Excellent post. Well thought summary analysis.