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TL;DR $2B!!!! ;-)
The conservative baseline iron ore prices used in the Judicial Recovery Plan are $61/t @62% Fe and $80/t @65% Fe. We don't know what NPV this results in, though we are told that the average EBITDA per year is $136m:
"Approval of Judicial Restructuring Plan - Amapa" (30th Aug 2019)
https://www.lse.co.uk/rns/KDNC/approval-of-judicial-restructuring-plan-amapa-i427sb3g1b3sys4.html
I find it useful to have in mind the likely additional EBITDA and NPV that increased iron ore prices bring to the project finances, all else being equal.
According to Custeel:
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines
2020-09-02 128.00 140.80
]===
At full production of 5.3Mt per year the 62%, 65% split is 0.9Mt & 4.4Mt respectively. Accordingly if these were used instead of those used in the JRP this would result in an additional EBITDA of:
((128.0 - 61) * 0.9Mt) + ((140.8 - 80) * 4.4Mt) = $60.3m + $267.52m = $327.8m
Full production is expected by 2024, but due to recent delays let's call it 2025, and to last for around 14 years. It's likely to last longer than this in practice as there are substantial resources which can be proved to reserves. Also the 5.3Mt could be increased substantially if the infrastructure and market can support it. Going with a conservative 2025 and 14 years the additional pre-tax NPV brought to the project by the additional $327.8m EBITDA is easy to estimate, making the conservative assumption that the ramp up is zero between now and then:
https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php
===[
Net Present Value (NPV)
Interest Rate: % discount rate per Period: 8.0000
Compounding: times per Period:1
Cash Flows at: of each Period End
Number of Lines: 2
Line Periods Cash Flows
0 (time 0) 1@0
1 4 @0
2 14 @327.8
For the Cash Flow Series
NPV = $1,986.39
Cash Flow Stream Detail
Period Cash Flow Present Value
0 0.00 0.00
1 0.00 0.00
2 0.00 0.00
3 0.00 0.00
4 0.00 0.00
5 327.80 223.10
6 327.80 206.57
7 327.80 191.27
8 327.80 177.10
9 327.80 163.98
10 327.80 151.83
11 327.80 140.59
12 327.80 130.17
13 327.80 120.53
14 327.80 111.60
15 327.80 103.34
16 327.80 95.68
17 327.80 88.59
18 327.80 82.03
Total: 1,986.39
]===
$2B is my conservative estimate of the additional pre-tax NPV8% that using today's spot price for the next 2 decades brings to the project. There is approximately zero chance the spot will stay at these values for the next 2 years. They will fluctuate. Historically they have been both significantly higher and lower. Hopefully the scoping study scheduled to be released after various (near-term!) milestones have been achieved will have a good go at unequivocally spilling the beans to the wider market on what some of us have already deduced, including the baseline NPV using the conservative prices! ;-)
Ob.
@Tomcat - Aren't companies sometimes valued at multiples of EBITA? As profits can sometimes be booked lower in the books for tax purposes?
Mr lithium/ that's not right it must £4
apologies for the obvious error... ;)
yep... kdnc [@20% : 27% : 49% ownership]...
•$400m x 20% = $80m pa... (4.7 x mcap pa)...
•$400m x 27% = $108m pa... (6.3 x mcap pa)...
•$400m x 49% = $196m pa... (11.5 x mcap pa)...
an additional $266m av pa... that’s $266m on top of the $136m in the rns... you mean amapa is now worth like $400m av pa... for a 14yr lom...
So what is your prediction the market cap will be in 12 months?
The conservative baseline iron ore prices used in the Judicial Recovery Plan are $61/t @62% Fe and $80/t @65% Fe. We don't know what NPV this results in is as negotiations around debt repayment are still taking place, though we are told that the average EBITDA per year is $136m:
"Approval of Judicial Restructuring Plan - Amapa" (30th Aug 2019)
https://www.lse.co.uk/rns/KDNC/approval-of-judicial-restructuring-plan-amapa-i427sb3g1b3sys4.html
I find it useful to have in mind the likely additional EBITDA and NPV that increased iron ore prices bring to the project finances, all else being equal.
According to Custeel:
http://www.custeel.com/en/csi.jsp
===[
Date Seaborne index 62% Fe fines Seaborne index 65% Fe fines
2020-08-14 120.65 128.40
]===
At full production of 5.3Mt per year the 62%, 65% split is 0.9Mt & 4.4Mt respectively. Accordingly if these were used instead of those used in the JRP this would result in an additional EBITDA of:
((120.65 - 61) * 0.9Mt) + ((128.4 - 80) * 4.4Mt) = $53.685m + $212.96m = $266.6m
Full production is expected by 2024, but due to recent delays let's call it 2025, and to last for around 14 years. It's likely to last longer than this in practice as there are substantial resources which can be proved to reserves. Also the 5.3Mt could be increased substantially if the infrastructure and market can support it. Going with a conservative 2025 and 14 years the additional pre-tax NPV brought to the project by the additional $266.6m EBITDA is easy to estimate, making the conservative assumption that the ramp up is zero between now and then (impossible of course!):
https://www.calculatorsoup.com/calculators/financial/net-present-value-calculator.php
===[
Net Present Value (NPV)
Interest Rate: % discount rate per Period: 8.0000
Compounding: times per Period:1
Cash Flows at: of each Period End
Number of Lines: 2
Line Periods Cash Flows
0 (time 0) 1@0
1 4 @0
2 14 @266.60
For the Cash Flow Series
NPV = $1,615.53
Cash Flow Stream Detail
Period Cash Flow Present Value
0 0.00 0.00
1 0.00 0.00
2 0.00 0.00
3 0.00 0.00
4 0.00 0.00
5 266.60 181.44
6 266.60 168.00
7 266.60 155.56
8 266.60 144.04
9 266.60 133.37
10 266.60 123.49
11 266.60 114.34
12 266.60 105.87
13 266.60 98.03
14 266.60 90.77
15 266.60 84.04
16 266.60 77.82
17 266.60 72.05
18 266.60 66.72
Total: 1,615.53
]===
$1.6B is my conservative estimate of the additional pre-tax NPV8% that using today's spot price for the next 2 decades brings to the project. There is zero chance the spot will stay at these values for the next 2 years. They will fluctuate. Historically they have been both significantly higher and lower. Hopefully the scoping study scheduled to be released after various (near-term!) milestones have been achieved will have a good go at unequivocally spilling the beans to the wider market on what some of us have already deduced, including the baseline NPV using the conservative prices! ;-)
Ob.