Hi googlebot. Good to see you here still. Busy as always. More focused on stable large cap shares particular US ones. I was focused on the long term and wanted to look past the short term on this. I did have a stop loss set to my average buy price which was about 12p. Unfortunately that was triggered and so I was out. I’ve lost track a bit of what is going on with BEM these days.
Just popped in the say hi. Always curious about how BEM is getting on and pleased to see it has had a good start to the year. With AIM value is all potential and risky as. Hence volatile. IMO making money in aim is hard work and you can be riding a huge wave very quickly and find it gone just as quick. The wave being very strong with all the quantitative easing at the time. You could throw money at any commodity share and get some gains which wasn’t my interest being in for the long term. However this creates a conflicting situation for us all. You hold on due to long term fundamentals but the market has had a shot of qe and gone into a monster bull run. It drags lots of short termers into the market. Like most here we held on far longer than we should.
Beowulf Mining are following in the footsteps of Northland Resources. They have their own deposits in Sweden with their Kallak iron ore deposit being their main focus. This is a larger and higher quality deposit than Northlands have.
This is a theoretical enterprise valuation using an explorer/miner to highlight that Beowulf Mining are undervalued on the stock market.
Drawing a comparison with Northland Resources a valuation can be developed.
EV = £430m
Near production = 176Mt (no discount to EV)
Measured and Indicated = 193.3Mt (32% discount to EV)
Inferred = 144.8Mt (70% discount to EV)
From this it can be concluded a production tonne in the ground is around £1.20/t. A Measured or Indicated tonne is 83.3p/t and an Inferred tonne is 36.8p/t. A further discount is applied to non-JORC assets of 90% giving 12.3p/t
From this it is possible to value Beowulf on the stock market and highlight its true value.
Inferred = 131.6Mt + 140Mt = 271.6Mt which is £100m
Non-JORC = 230Mt up to 468Mt = £28.3m to £57.6m
Giving a total value now of £128.3m to £157.6m
With the whole deposit JORC'ed to Inferred this becomes 600Mt + 140Mt = 740Mt which is £272.3m
Measured and Indicated will further add to this and take a 600Mt deposit to £500m with a 140Mt Inferred at Ruoutevare on top giving a total of £551.5m
This does not represent the premium paid for by a buyer. Currently an Inferred tonne will typically sell for £0.50/t at 36% premium, implying that a Measured or Indicated would sell for £1.13/t in the case of a buyout of the resource.
With an Inferred the iron assets will sell for around £370m and with Measured around £750m.
This gives a dividend after corporate tax and Beowulf keeping 20% of the sale:
Inferred JORC Kallak and Ruoutevare = £1.18/share
Measured JORC Kallak and Inferred Ruoutevare = £2.40/share
Using a p/e ratio of 10 and then working through an enterprise valuation calculation to produce a share price. This is a production share price and requires no discounting assuming it is achieved and that the tonnage is discovered. Using a 68% concentrate price of £62.5 per tonne.