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Below are my numbers
EBITA for 100$
NPV for 61$ 975,929,544
NPV for 100$ 1,950,394,990
Pre-tax, very approximate NPV10 $1B
Think of it like a baseline calculation. In the same way using 61/t and 80/t, and whatever the shipping rate they used per tonne is. You can then vary these after you have your baseline NPV if you wish. In the same way I determined there could be another NPV10 $1B to the project if today's iron ore prices were used - all other variables remaining the same.
I'm not sure you want to be converting to current rate at all. i.e. use 3.6 throughout, then make a judgement on whether you think what you have calculated is a conservative NPV or an optimistic one. I can think of other approaches, but that seems the simplest for the big picture view.
Regarding exchange rate - I see your point. As those calculations have been done on a different exchange rate, I too think I am better off using that exchange rate then converting to current rate at the end
I do hope that @Kiran is on the ball and will let the market know tomorrow or Wednesday if the date has slipped, otherwise it could get a little, messy, shall we say on here... It's possible the decision was made today, though I feel tomorrow is more likely, as that is actually "the end of June" - no ambiguity. Admittedly, if it has slipped and he fails to update us, and the SP slides, could be a great final top up opportunity! LoL. ;-)
Very good point @tomcat! It does just say "a ruling in relation to DEV's petition to annul the secured creditors liens and charges over the Amapá Project is now scheduled for the end of June 2020.". Not sure how that passed me by. LoL.
either the banking syndicate definitely takes a uniform position and concludes the negotiation with recuperanda... or starts the execution of its guarantee... which is iron ore... therefore... i grant the 60-day deadline for the union to express itself conclusively regarding the payment structure of its credit or the execution of the guarantee...
do they need a hearing for a ruling... they’ve been told to decide on a settlement or execute their guarantees...
The only thing that makes sense on the bottom of that court document: Joined, Entwined and Unified
There are no joined processes, entrenched and unified to this process.
There are no future hearings linked to this process.
I'm pretty certain it's 1291.7... You can check it by adding the two numbers in the next two rows which are easier to read. e.g. 64.59 + 1227.175 = 1291.765. But it really doesn't matter! ;-) Besides, I'm using the EBITDA, I just included that for reference when trying to understand how the BoD arrived at their estimates.
The thing about using a different exchange rate to 3.6 is that the revenue flows are then not from the $61/t (62%) and $80/t (65%) used in the JRP (think about it), so you would need to adjust those and other things too. Better to stick to 3.6 and adjust in what ever direction you think an improving exchange rate would impact the project. I think it will have improved the NPV due to the OpEx being lower. I'm going to recheck the 1292 figure! LoL.
I would agree on using a discount rate of what is the expected rate if return in that particular industry. But just asking the question to see what others think :)
I used similar numbers Obs (probably a bit less - I used 1272 as that is how I read it...) about I used an exchange rate of 5.4 (the xe number as of 2 days ago)
I will try to paste my working here tonight so I can get your opinion on how accurate I have been and how much I need to improve. Currently on a train :)
How does this compare to what you've extracted @Cause?
Year : Revenue net of shipping : EBITDA
2019: 0 : 0
2020: R$148 : R$115
2021: R$148 : R$115
2022: R$386 : R$200
2023: R$760 : R$502
2024: R$1388 : R$938
2025: R$1292 : R$832
2026: R$1292 : R$816
2027: R$1292 : R$800
2028: R$1292 : R$783
2029: R$1292 : R$765
2030: R$1292 : R$749
2031: R$1292 : R$727
2032: R$1292 : R$707
2033: R$1292 : R$688
2034: R$1292 : R$665
2035: R$230 : R$91
Although the USD to BRL has changed from that which I concluded was used in the JRP (3.6) I think it's best to stick with that.
As you are hinting, the NPV you use is up to you. Typically the point is to choose one which allows you to compare different projects, financing and sensitivities, usually in conjunction with the IRR (internal rate of return), which is the discount rate which gives a zero NPV - the higher the better, and other metrics.
You might want to use a low NPV to compare against certain projects - gold miners typically use 5%.
This got shared around these boards a lot several years back. Still relevant today:
"How to value junior mining stocks" (07 September 2015)
A new update just came to the court pages. Not sure how major it is. Seems to be an email attachment.
06/29/2020 Electronic Message (e-mail) Attached
06/29/2020 Request for Attachment on the Face of the Record
06/29/2020 Electronic Message (e-mail) Attached
With regards to the discount rate, isn't discount rate the % of return you would expect if you were to invest this money in a different commodity (I.e - Stock market)
I make it that prices of around $100/t add around $1.5B of pre-tax NPV6 to the project over the $61/t baseline. Incredible really.
Also using an NPV10 for this particular scenario is quite conservative, an NPV5 might even be appropriate - but probably not for other scenarios!
@Cause Don't forget that the 1 billion is pre tax and a few other things which you can lump together into the "tax" bucket. As to: "So does this mean the NPV of revenues- shipping cost should be almost 1 billion more than the forecast of JRP?" - if the iron ore prices stayed around today's price for the life of mine, rather than $61/t, then it looks that way to me. :-))
I have now gone for the method suggested by you. So what I did is add (5.3 million + 39 * 5.4) to the net revenue figures (the ones I guessed from the table as table isn't clear) and deduced the NpV through the formula in the previous link I shared.
I do end up with approx 1 billion higher value compared to the NPV deduced from the figures of the net revenue.
So does this mean the NPV of revenues- shipping cost should be almost 1 billion more than the forecast of JRP?
Incidentally.. I got a NVP os around 2 billion in this calculation. Am I wildly off the actual number?
There are many different ways of coming at the problem. As you recognise, doing what you did increased the cost of the shipping. Now it is possible that shipping costs would be higher when iron prices are higher, but since this isn't necessarily the case I would say it is best not to follow a method which introduces that link.
I'd say the simplest thing to do is to assume that if the prices of our 62% Fe product goes up $39/t, then the price of our 65% product goes up by the same amount. The additional gross revenue at full production is then simply $39/t * 5.3Mt.
As to your other questions. Most of the details are reasonably swamped by the larger signals. I think it is fair to say if all goes well we'll own 27% of the JV, with likely little, perhaps no dilution, so you can then equate that to a contribution to the share price if you like. I don't think it is safe to assume we'll get to 49% or that there won't be dilution if we do, as it depends on lots of factors.
I did the following
*took the net revenue for each year projected on the table
*divided it by 61 and multiplied it by 100 (to get the net revenue if per ton costs 100 - I understand I am also increasing the shipping cost and not considering different qualities of iron ore but I want to be lazy here) the use that value to calculate the NPV. It works out to over a billion $. I hope I am somewhere close to the correct path. Can you tell me where I am going wrong?
Also do you consider the 18% interest on outstanding debt from 5th year into your calculations (I am too far away from going to that detail). Also do you take 49% of the eventual value as Cadence will only get 49% if 115 million is invested (30 million is 49% so by assuming 115 million investment I am also assuming 49% equity)
Depends what your goal is really. Perhaps the JRP massively overestimates some costs, but underestimates others? It's only *their* estimate of Earnings Before Interest, Taxes, Depreciation and Amortization aftera all. LoL. If I were you, I'd have a go at understanding why I stated: "I make it that prices of around $100/t add around $1B of pre-tax NPV10 to the project over the $61/t baseline. Incredible really."
Do you think I should just use the EBita numbers as they are on the table?