Member Info for GeologyStudent

A long way away from our relist price of 10p and even further away from our suspended price of 20p.

I retract my statement regarding the current valuation of Cradle Arc. It is currently expected that nameplate capacity will be reached by Q4, with gradual ramp up in Q3 in which 70% of full capacity will be achieved. In Q4, I expect that Cradle Arc will be trading at £50mill at current copper price.

Valid statements. Unfortunately, when it comes to raising finance, Cradle Arc is in a position of weakness as our principal asset is formerly a distressed asset. We will see this move when Cradle Arc release positive financial results, thereby demonstratIng the robustness of the project. At current copper price, this should be trading at £50mill.

The company expressed that the acquisition will be transformational. It will be transformational for three parties: Pre-IPO and IPO shareholders; new shareholders on the secondary markets; and long term shareholders who have sufficient funds to average down. From an operational perspective, I trust our new CEO to complete his objectives.

should just fire him. During his five year tenure as the CEO, long term shareholders have endured a 98% decline in share price.

Mistake, the equation is as follows: EV=MVE+Net Debt

I'm not invested here but have been following the KEFI story over the years. I would be reluctant to use NPV to determine the market value of equity at any given point of an asset's lifecycle. Alternatively, it is more prudent to use the EV/EBITDA ratio. Assuming an EBITDA margin of 30% at gold price $1,300/oz and annual production level of 135,000 oz, EBITDA per annum. is calculated as $52.6mill. Further, using a ratio multiple of 6x, the expected EV is calculated as $316mill. In order to determine market value of equity, one has to deduct net debt from EV such that EV=MVE-Net Debt. As debt funding stands at $160mill, the MVE for the Tulu-Kapi Project stands at $156mill. As KEFI shareholders retain a 54% interest in the project, the attributable MVE is $84mill/£63mill. Upon successfully achieving steady state production in 2021, and assuming shares in issue amount to 550mill, I anticipate a SP of 11.5p. Moreover, upon full debt repayment in 2024, I anticipate an uplift in SP to 23p. All the best.

I believe Q3 results in October will be better reflection of the production levels at nameplate capacity. At nameplate, we should be achieving consolidated production levels of 3,000 tonnes of copper per quarter. I believe the figures released in Q2 will be a combination of pre-steady state production and production during the quarter. The production during Q2 will be less than 3,000 tonnes as we initiated and gradually ramped up production.

EV/EBITDA ratio of 6 and margin above C1 costs as a proxy for EBITDA margin, and copper price of $3.10/lb, the following are my valuations: (1) Current nameplate capacity of 12kpta: �50mill (2) DMS upgrade: �100mill. This assumes that principal debt payments are negligible at that point.

In any case, the AISC is significantly higher than the $2.00-2.10/lb that was implied in the initial scoping study done by Penmin, hence my disappointment.

The AISC does not take into consideration the exorbitant cost of debt that will be secured in order to finance the DMS plant. I'll explain. Use the annuity formula and assume the following: (1) NPV $272mill at 8% discount rate at $3.00/lb (use discount rate as WACC) (2) Average annual production of 21ktpa for 14 year LoM. The annuity formula is as follows: NPV=C x [(1/r) - 1/(r(1+r)^14)], where C is annual cashflow, r is discount rate and NPV is net present value. As a result, 272 = C x [(1/0.08) -1/0.08(1.08^14)]. Using this computation, C = 33. In other words, the mine will generate annual cashflows of $33mill. Assuming 21ktpa is mined, this translates to $1571/tonne or $0.71/lb. The NPV is based on a copper price of $3.00/lb therefore net cashflow per lb of copper is $2.29/lb. This is the AISC announced in the report. This is based on a 8% discount rate/WACC irrespective of levels of debt/equity. My contention is that that discount rate should be higher to reflect the cost of debt of 18% during the period were the high-interest debt is outstanding. In my estimation, this will take 3 years to pay off completely. I can't compute AISC with this adjustment without a detailed breakdown of expenses. However I will concede $2.50/lb may have been a slight overestimation. More like $2.40/lb.

The NPV numbers are unlevered and before debt servicing. Therefore, one must add interest charge for the projected $65million debt to account for cost of debt (which differs from cost of equity). The NPV figures released last week assume unlevered and wholly funded via equity at a discount rate of 8%. Given the horrific cost of debt we've accepted for the $10mill debt financing (18%), I expect that the subsequent $20mill debt financing required for the DMS plant will also be delivered on the same terms. Your statement would be correct if the cost of equity=cost of debt.

To answer your answer, I reiterate a share price of 40p by Q3 2019 depending on options/warrants exercised.

I prefer to use ratio analysis over NPV to determine intrinsic value. In any case, the NPV put forth is rather misleading as it is computed before debt servicing and therefore cannot be used to assess intrinsic value. In my opinion, the news release last week was disappointing. The purpose of the expansion was to reduce marginal costs via economies of scale. Unfortunately, using the model by WAI, marginal costs have increased slightly in the DMS case - the all-in costs for the 12ktpa case is $2.40/lb and for the 21ktpa case it is $2.50/lb (after debt servicing).

I concur. My average is 26p. Been here since 2014 and averaged down from 300p (equivalent).

The BoD have no desire to raise funding through equity. As I understand, it will be done via debt funding and internally generated cashflows. Albeit I expect the cost of borrowing to be equally horrific as the newly acquired $10mill debt financing, in order to reflect the risk inherent to the project.

It was a generally positive news release. However, AISC is higher than I expected and DMS upgrade will take longer than I expected. I've revised my share price target to 40p by Q3 2019.

indicate we will recover back to our suspended share price of 20p once steady state is achieved at the 12ktpa level. Confidence will return once operational and financial results are released in September 2018. Thereafter, we will commission the DMS plant and achieve steady state production at the 22ktpa level in Q1 2019. We should be trading at the 45-50p level next year.

I believe he is referring to gross profit. When considering operating expenses, interest and tax, the all-in cost is approx. $2.40/lb. When the DMS upgrade has been installed, this will fall to approx. $2.00-2.10/lb.

From an operational standpoint, I have every confidence in the management team fulfilling their objectives. If you have a low average, you'll be in the money within 12 months from now.