Member Info for Daisan

Alfacomp,

You appear to be suggesting that nobody should bother posting anything of material value here anymore. I demur!

I see that it didn't display as hoped so just to clarify, the only two numeric columns displayed are the share price at the start of the month in question and the forward PE ratio as would have been perceived at the time based on known information.

I have done an historical perceived valuation for Bushveld since the Vametco purchase. Bear with me on this as it is a bit difficult to explain. I have looked at the known facts at the time and used this as a basis for projecting a 12 month profitability. Cross referencing this with the share price and the number of shares at the time I can get an indication of what the forward PE ratio was at that time (I have used some estimates for tax/royalties/etc.). Now, PE ratios aren't perfect indicators but they give a sort of indication of value.

Using the figures available in the public domain, I get the following (hopefully the formatting isn't too onerous):

SP PE
2017 Apr 8.03 33.32
2017 May 8.16 26.19
2017 Jun 9.05 36.73
2017 Jul 8.17 15.02
2017 Aug 9.72 9.67
2017 Sep 9.90 9.67
2017 Oct 9.47 21.66 Rise due to a reassessment of costs to $25/kg
2017 Nov 9.55 14.43
2017 Dec 8.48 5.97
2018 Jan 8.24 3.71
2018 Feb 8.53 2.94
2018 Mar 8.38 2.47
2018 Apr 14.57 4.62
2018 May 22.86 7.54
2018 Jun 19.05 6.52
2018 Jul 23.20 4.81
2018 Aug 26.90 5.47
2018 Sep 22.15 3.25
2018 Oct 27.29 3.22
2018 Nov 27.29 2.55
2018 Dec 27.29 2.20

I have struggled with the formatting so have removed most of the columns! Hopefully the above displays OK.

Anyway, to clarify what this says.

When we first bought a share of Vametco, the market was pricing in a PE of over 30 which may have been a little euphoric. Since then, the Vanadium price has increased consistently (and recently much more dramatically) but this price has not been reflected in the share price. Consistent selling by large holders (Erongo as an example) has prevented this from happening. More recently we have had selling from a recent placee which has produced much the same effect.

The upshot of this is that the forward PE ratio (based on the next 12 months with what is known and 90% of nameplate production) has been steadily falling - dramatically so when we have taken out Vametco shares of YD and Sojitz. This has reached a point where we are almost as cheap now on a forward PE basis as we were when we were at 8p.

I have projected out figures for November and December based on FeV prices of $120/kg and $135/kg. These would make Bushveld cheaper than ever before.

Caveat: this assumes that costs are approx. $25/kg (from Oct 2017 - before costs were taken as those published in the admission document) which may be an underestimate.

My apologies if I have made some error of calculation or if some of my assumptions are erroneous. I don't believe that, in the latter case, they are too wild and are certainly defensible. Irrespective, the central thesis of progressive undervaluation would survive considerable alterations to the basic assumptions.

Given the cash being generated here currently coffeecups, I don't think that it has to be an either/or. BMN should be in a position to both grow the business and deliver a dividend next year.

Given the rise in the Vanadium price, the company will be making more than enough cash to cover off growth plans so the excess should be returned to shareholders. Whether that is as a dividend or a share buy back is up for debate. Of course, it would be good to know how much is excess and what the money to be invested in is to be used for.

I think with all of the criticism of SPAngel we have lost sight of a key factor for BMN going forwards - the price of Vanadium. As a producer three factors will drive the price of the shares - production numbers, costs and price of the product. We have a reasonable handle on the likely production and costs but price is outside of BMN's control. Whilst I do not see an enormous amount of production coming on stream any time soon I confess that I have no real hard evidence as to the likely global supply and demand figures. Getting a handle on these to some extent will give a much clearer indication of the likely price of the product over the next 3-5 years (the only time period that we can realistically work on). I know that Alfacomp asked for assistance in this a while ago but it really is key to understanding the likely market dynamics and would provide more evidence to support the thesis of strong Vanadium prices for a more extended period than a brief spike.

Knuttie, I modelled a range of options but all of them required an unreasonable collapse. If >$100/kg is maintained for any length of time in 2019 a $45/kg average quickly becomes impossible. Of course, the long term average is $35/kg so we could be having this discussion at the same time next year.

Astonishing. You couldn't make it up.

I confess that I value logically constructed arguments. Hence, I find it difficult to reconcile:

Current Ferrovanadium price - $120/kg

"Talking about hot commodities the vanadium price just keeps going from strength to strength, and looks like it's got some legs to it. Whilst there will be some more vanadium attracted into the market by these high prices it is difficult to see where a lot of new vanadium is going to come from."

"So we raised our assumption for the vanadium price for next year just a little bit to $45/kgV from $35"

Hmmmm.

Perhaps it would have been more appropriate to have said:

"Whilst the amazing strength in the Vanadium price has surprised us, we believe that there is a great deal of supply that will be attracted onto the market in 2019 as a result of these high prices and that the price of FeV will collapse to such an extent that it will not only lose almost 70% of its value but such a loss will happen almost instantaneously in the New Year".

Pdub,

Sounds like a challenge! Right, here goes:

I have never liked your lower case 'd'. It should surely be 'PDub'!

I feel ashamed already.

As a radical suggestion, you could just look at the last RNS!

I notice that Tando posted some decent drill results on their newly acquired SA property. https://smallcaps.com.au/tando-resources-first-assay-results-south-african-vanadium-project They have indicated that their current drilling campaign will be enough to define a resource. They are moving very quickly and it will be interesting to see how they move this forward to production, which I am pretty sure that the deposit will support, given where it is and the well understood geology of the region.

I think one thing that should be stressed about the Mokopane NPV is that it is for a small part of the project. The NPV for the whole lot would be very large indeed.

Oh boy. The 'Mr. Collins" of the ARS board.

I have to say that you are likely to be sadly disappointed if you think that the JSE is the solution to undervaluation.

Everything will experience from the off unless there has been a substantial RNS released if only as a result of market makers marking them down to forestall selling. I expect that will be the case here as well.

What is there to slow it down? No substantial supply coming that we know of, increased demand and no realistic way to substitute significant amounts. And you can't just stop making steel. I am sure that it will pause at points over the next couple of years but the direction of travel appears to be indisputable.

The AIM all share index is down 10% since 1st October after today's 3.33% fall and is now at its lowest level since September last year.

Knuttie,

One swallow does not a summer make. :)

I still wouldn't go near UKOG. There are other O&G shares with much better fundamentals if you want exposure to the sector.

BMN trades are becoming a bit like the X Files!