I am really quite optimistic about MIL Resources. I place it up there with some of my other picks like (in order): Aquarius Platinum, Anvil Mining, Minotaur Resources, Qld Gas Company. I'm so struck by this company I have just produced a cashflow statement in order to get some idea of what I think they will be worth. I have made some assumptions:
1. Concentrate price of $US75/tonne
2. Exchange rate of $0.90 to US
3. The Chinese(?) partner pays up $20mil for 40% equity, and this is sufficient to finance the feasibility study and ore reserve definition
4. I make no inclusions for the gold projects, which have their own merits, but also their short term burdens. They too will be funded by a partner I think. Newmont or others??
5. Using $300mil capex, their project burden would be $150, so $30mil equity, so I allowed for a capital raising of $30mil at $0.30. Mind you I made no allowance for the 60mil listed opts. They will have some impact, so discount 20% off the forecast share price.
So how certain am I of this stock? Well I bought Minotaur Resources before they even put a drill hole in the ground. I was right about that one. The other stocks were very advanced. MIL Resources is not so advanced, but I think the prospect of a major Chinese partner is going to start the investment. Aeromagnetic surveys ought to be able to provide a clue to the concentration of the ore. And I have not even discussed the gold projects, which are looking good. Geez, at $8mil, being listed is worth $5mil, they have $3mil in cash. Where is the project value. I know this is recession, but not to the Chinese and Indians. This is their 'Industrial Revolution', and we get to have a front row seat. But you really have to buy a ticket.
Now, I might add that I bought Aquarius Platinum and Anvil Mining too early...as a geologist/analyst I tend to see the value 1-2 years before the market....and I get very excited. So I would not invest the house just yet, but you ought to be accumulating a stake.
Feel free to look over my cashflow statement, it was a rush job!
Update: Please be advised that I am not happy with my analysis of this stock. The next night I realised that I had not allowed for the 50% project dilution I envisaged. i.e. The project valuation is not $2, its $1 for this reason. The likely development path is more complex than I expected. The ore market and strategic issues are big. I am therefore developing a more thorough analysis for this stock. My concern centers on the availability of similar low-grade titanomagnetite ores in Sichuan province, China, when whether they are likely to make it to other steelmaking areas. I don't think its a concern because the growth in steel demand is huge, and Sichuan is already importing about 7Mtpa of iron ore, compared to over 500Mtpa for China (from Australia and Australia mainly). Watch for an updated analysis. Basically my previous analysis displays my ignorance on this type of ore, this type of steelmaking, as well as the Chinese iron ore market. All of this is being resolved as we speak.
--------------------------------------------
Andrew Sheldon www.sheldonthinks.com
No comments:
Post a Comment