RE: Balance Sheet/Mufulira1 Jan 2024 21:12
Lewsur, superb find, to quote:
"The revenue value of these materials is $750m copper and $1.32bn cobalt at current prices. Assuming a $4,500 copper margin (which may be conservative when Mufulira Waste Dump has an estimated $3800 AISC) and $10,000 cobalt margin (this being a best guess as we don’t have any metrics to assess the AISC of cobalt yet). This resource has a theoretical $840m EBITDA value too. So when Leon calls it a “significant resource” he’s not exaggerating.
Now to the SPV (Special Purpose Vehicle) for the Mufulira Waste Rock JV.
JLP will own 30% of an annual 24Kt operation. 350Mt means this 24Kt will grow. It must. Assuming a 1.5% copper concentration, it would take 218 years to clear the waste rock (3,500,000/24,000 * 1.5%). We also know the likely AISC is $3,800/tonne. So at $8,500/tonne for 60% cathode and $6,000 for the 40% toll refined works to a $67.7m+$21.1m = $88.8m EBITDA.
Assuming a $50m build (as indicated by the RNS) funded by $35m equity and $15m inter-entity debt (for JLP’s equity) then $88.8m EBITDA less $1.2 I, $21m T $5m D, $1m A is a net profit of around $60m or net £14m to JLP. So year 1 pays for JLP’s 30% equity stake and thereafter this enhances profits and generates cash for JLP by £14m/year - and more once the 24Kt capacity grows.
Even on a conservative PE of 8 this share price should have jumped by 4p a share on the news. Not 1p. (£14m x 8 = £112m. £112m/£178m marcap)x 6.5p = 4p.)
What’s more JLP will charge for any and all engineering, including any R&D. “for a fee”. Even assuming this is only re-imbursing at cost (and no reason to think why it should be) that same R&D will likely be useful elsewhere - so we are talking fully expensed R&D - potentially worth £1m-£2m a year to JLP comparing to amortisation in 2023’s accounts.
But the biggest and most exciting aspect to this deal is IRH’s partnership. Why? Its parent, IHC, is an extraordinarily successful company. See the highlights below. It’s 26 years old. Its Vision 2030 Strategy and “Next 50” puts the electrification theme firmly in its sights."
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Even on a conservative PE of 8 this share price should have jumped by 4p a share on the news. Not 1p. (£14m x 8 = £112m. £112m/£178m marcap)x 6.5p = 4p.)
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Should have jumped up 4p a share not 1p, well its funny that that 4p jump, would have taken the price right up to my next price target of 10p, above the current resistance level of 7p. I actually don't think it will much longer to get to 10p, from curent levels of 6.5p. As discussed, price is currently consolidating, in fact, it looks like a flag pattern, which generally occurs at the midpoint of a big rally. So expecting another leg up to complete the rally, in due course.
All is looking great here.....
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