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I cannot stress enough that I choose to make very conservative assumptions. Each to their own as far as making your own assumptions.
It was a complete ballpark but thinking back it would be assuming £22m raised in equity to put towards Amapa reconstruction and any other investments required. At 60p would get you to 200m shares (25% dilution). Only half this amount or less should be required - look at the project equity portion on the spreadsheet- of course EMH could be sold off instead and that may be preferable and there may be no dilutions at all other than the options outstanding. But my opinion is it’s better to be surprised on the upside than the down side.
Part of the money we raise to fund our part of the equity needed. But yes we could potentially get the 49% which puts us in another league (double my numbers roughly).
Does anyone care too much if we make 8x from here or 9x in my guesses so no need to wince? The point was to provide a baseline to show the potential of the opportunity and provide a rough range of potential future values. Happy to see anyone else’s figures not suggesting mine are perfect but a good starting point.
The courts have just got round to publishing the prior decisions so nothing new there I could see.
WP Brave is the next ship to look out for. They will be coming thick and fast though on Pier 2.
Not to worry though, I mentally added the following to your final paragraph:
Share price £2.75-£4
All of the above just for Amapa alone. You can simply half these to get a $40/t estimate and the figures are still compelling, or near double them if you think the equity raised from dilution to 200m shares would be sufficient to take us to 49% of Amapa. ;-)
@EV Not sure why you diluted the company by a third without increasing the 27% ownership of Amapa to 49%? There's conservative, and then there's conservative! LoL. It's also possible we start to buy back at some point from profit/sales of assets rather than dilute further or divvy out: https://www.investopedia.com/articles/active-trading/073015/dividend-versus-buyback-which-better.asp
Incidentally, did you spot anything of note in yesterday's two long court movements?
So what might a possible $80/t net profit look like in terms of earnings per share Forward P/E and possible dividends at 27%.
£82.33m/yr factoring in possible dilution to say 200m shares.
Based on the first full year of production @ 5.3mt:
EPS is 41p per share
Forward P/E 0.7
Dividend circa 15p/ share (£30m distribution)
Retained earnings for other investments (Cash) £52.33m (26p per share)
Possible market cap £550m-£800m (P/E 7-10)
Share price £2.75-£4
All of the above just for Amapa alone. You can simply half these to get a $40/t estimate and the figures are still compelling.
All good points EV. Tbh 8% discount factor for NPV in NIRP/ZIRP world is also ultra conservative too, the real value will be much higher.
Thinking about it the KPMG haul has the breakdown for the costs, but these aren't relevant longer term when we are using the private port so perhaps I'll stop here and wait for the PFS! LoL. ;-)
Oh dear... Calculator malfunction (I didn't use one!) LoL. Updated to:
Not sure if that includes loading/unloading, but if it doesn't then how about a crew of 10 people for 100 hours at $10 an hour? (10 * 100 * 10) / 45,000 = $0.22/t. Negligible. Therefore profit before tax today would be $213/t - $30/t - $23/t = $160/t
Indeed @EV plenty of upside! Your $80/t profit (after tax I presume) isn't that unreasonable either. Current price for 65% Fe/t after significant falls from the highs of $260's/t) without any premiums (which we will likely have ~$30/t) is around $213/t: http://www.custeel.com/en/csi.jsp The OpEx + G&A is $23/t https://www.cadenceminerals.com/wp-content/uploads/2021/06/Corporate-Presentation-KDNC-JUNE-2021-1-1.pdf and Brazil to China shipping rates are currently around $30/t https://en.sse.net.cn/indices/fdinew2.jsp Not sure if that includes loading/unloading, but if it doesn't then how about a crew of 10 people for 100 hours at $10 an hour? 45,000 / (10 * 100 * 10) = $4.5/t Round it to $10/t (each end). Therefore profit before tax today would be $213/t - $30/t - $23/t - $10/t = $150/t
Looks like it is real! :-))) Quite a long article, but this demonstrates it is Amapa.
Now why might this have been kept under wraps I wonder? ;-) No mention from @Kiran...
"Amapá takes a decisive step towards its industrialization with the construction of the first steel plant" (11/01/2013)
https://www.psb40.org.br/noticias/amapa-da-passo-decisivo-para-sua-industrializacao-com-a-construcao-da-primeira-siderurgica/
===[
Within 18 months, the first blast furnace for the production of pig iron in Amapá will start operating, the initial stage for the construction of the first steel plant in the state. With investments of US$ 120 million from the Zamin Ferrous group, headquartered in London (United Kingdom), the project and the investment plan were presented this Thursday, 10, to the governor of Amapá, Camilo Capiberibe (PSB), by the owner and president of the Indian corporation, Pramod Agarwal
]===
So an extra three years adds 10% to the NPV8 figure, I am more than happy to be very wrong on the low side underestimating this, I will be more than happy if the low end estimates are achieved, the upside best case scenario is something dreams are made of, easily a 10 bagger in terms of upside but I think there might be a buyout or takeover before that point.
@Evan. Perhaps now is a good time to follow up on this? If true then it looks like there is scope to build our own steel processing plant to supply local demands! :-))))
observer842@05 Jun 2021 11:53
=====[
There there is this - which I won't be buying as I give it little credence, but I might follow up on at some point as it might indicate there were plans afoot previously that they got wind of - and which we (on here at least!) have yet to discover. :-)))
"Zamin – Macapa Steel Processing Plant – Amapa Project Profile" (March, 2017)
https://www.marketresearch.com/Timetric-v3917/Zamin-Macapa-Steel-Processing-Plant-10924619/
===[
"Zamin – Macapa Steel Processing Plant – Amapa Project Profile" contains information on the scope of the project including project overview and location. The profile also details project ownership and funding, gives a full project description, as well as information on contracts, tendering and key project contacts.
]===
]=====
Nice analysis @EV. Though I strongly suspect we'll see a mine life greater than 14 years, closer to 17 years or more in the PFS as a consequence of the 21% increase over the historical mineral resource estimate, which this historical 14 year mine plan was based on.
"Updated Mineral Resource Estimate for the Amapa Iron Ore Project" (02 November 2020)
http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=311428202001057764
===[
This Mineral Resource represents a 21% increase in total mineral resources compared to the equivalent MRE published by Anglo American 2012.
...
The historic mine plan would mean that the Amapá Project would produce at steady-state production an estimated 4.4 Mt of 65% Fe and 0.9 Mt of 62% Fe per annum for approximately 14 years.
]===
Anyone noticed the floating rig...
I mean both Unamgen and Dev (Incl Geralds) are shipping to China so that must be the best option.
Being that the stockpiles are already at the port and shipping rates maybe avg $15,000/day saving 10 days of shipping is $150,000 on $7,200,000 worth of ore @ 160/t it isn't as significant as you might think (2%) an extra 20 days being 4% of total cost at 160/t.
At $20,000/day x 20 days you're still only at 5% of total revenue. Not nothing but not as big a deal as you might estimate.
The higher the price of ore the less this factors in.
If I recall they are supplying historic customers familiasr with the ore and so perhaps there's a reason yet to unfold?
It seems to me this is important to find the most profitable customer net of shipping costs.
Ok let put the same question differently, why don't suppliers nearer to China supply China and Amapa find a nearer customer with much lower shipping costs.
Strange question with an easy answer Brazil is a net exporter of ore because it has a surplus to what it needs/demands, same as Australia, there aren't enough smelters and steel mills to take it all and there is more demand in other contries so it makes sense to export it, same for soy, wood etc, this is just a global supply demand equation. China has an insatiable demand for Ore to churn out the finished products the world requires.
It's quite simple maths if we hit the 5.3MT/Yr expectation.
5.3mt x estimated net profit per ton after costs x 27% (or 49%) = $$$/£££
At 27% every additional $10/t net profit is $14.31m/yr to Cadence - at 49% this would be $25.97m/yr
$30/t profit = $42m /yr profit to Cadence
$50/t profit = $71.5m / yr profit to Cadence
$80/t profit = $114.48m /yr profit to Cadence
If we could get $50/t net profit avg over the 14 years at 27% and assuming 14 year mine life at an 8% discount with full production in year 4 the NPV 8 to Cadence is $485m so this is then worth £348.8m (over £2 a share) in todays money.
At $30/t profit over the life of the mine this 27% of NPV8 is worth $285.38m today = £205.24m (>£1.35/share)
, given we trade at < 30p AND have other assest that could bring value. this is an incredible risk\reward.
I like the odds, I like the profit, hence the big investment here.
Good luck all. Look forward to the big day.
page 9… https://www.cadenceminerals.com/wp-content/uploads/2021/06/Corporate-Presentation-KDNC-JUNE-2021-1-1.pdf …
month 1 = apr21… start of q221…
activities started…
settlement agreement with secured lenders…
iron ore shipments from stockpiles…
sale of fe stockpiles…
commissioning studies…
Why won't Brazil buy their own Iron ore?
We need a closer customer.
I think the point around 27% which was highlighted this week is important: we may yet to have our 20% ownership, but the project is progressing regardless, as authorised by the courts, meaning the gap between taking our 20% and 27% is closing, and might even be simultaneously if the banks drag their feet sufficiently!
KDNC's initial valuation target appears to be Anglo's impaired $660m (although @Kiran continues to incorrectly state $600m). 27% of this is $178m or £128m. With the value of our other assets this is around £1 a share. Some think the market will value higher on expectations, some think it will be lower. 60p to £1.50 seems to be the range from trusted posters. The lower end for 20% ownership and the upper end for 27% ownership. Happy to hear to the contrary!
The next target is likely Anglo's unimpaired $1.2B, and this might be seen after rehabilitation and full production a few years later, when we hopefully will own 49%. 49% of $1.2B is $588m or £423m, call it £3 a share. The true valuation will depend on many factors, shipping costs, exchange rates, iron ore prices, expansion plans, how we funded the 49%. For instance that $1.2B valuation was at a time when the USD to BRL exchange rate was below 2, it's now 5.2 meaning certain relative OpEx costs are significantly cheaper than then. e.g. monthly earnings: https://www.ceicdata.com/en/indicator/brazil/monthly-earnings
And certainly if we were shipping at full production today I'd expect significantly higher operating profits than the $171m reported by Anglo, which as I've noted previously is fairly low for various reasons... The benefits of being a multinational! Ahem. i.e the $1.2B valuation may in hindsight be quite conservative, especially if we follow through with expansion plans. :-)))
Iron ore prices may have cooled recently, but they have a long way to fall before I start to worry. I wonder if we managed to lock in the price for the next 4 ships before the fall?
Ob