from Swedish Redeye site part119 Feb 2019 17:12
Beowulf's value with LKAB's result as a basis. We maintain previous valuation. The potential impresses.
2019-02-18 09:11
Views: 1663
After feedback from our previous calculation, we explain the model from another angle. The model we use for the Beowulf share is based on LKAB's annual report 2017. We assume that Kallak simply has at least the same profitability conditions as LKAB's now producing ore field. We have chosen not to rely on other economic models because they are extremely sensitive to project-specific parameters such as borrowing cost and yield requirements. Small adjustments give a big impact on the result.
Summary of the valuation. According to our model, the Beowulf share can be valued directly after the granted processing concession to approximately 9.3 SEK. In order to gradually trade up to SEK 16.2.
The valuation is based on the following essential assumptions and data:
Kallak has at least the same profitability as LKAB's current ore field.
Kallak has comparable ore quality with LKAB's ore.
LKAB's operating profit for 2017 is SEK 6.7 billion
LKAB outlet 2017 is 49.6 Mton crude ore.
LKAB's result for 2017 per tonne of raw ore is SEK 135.
Calligraphy at full production gives 10Mton of raw ore per year.
Beowulf releases 50% to partner against it taking all costs, no borrowing costs for Beowulf.
PE number 12 at full production.
Alternative placement 5.5% for 10 years.
Simple present value calculation.
The valuation in detail of Beowulf's assets in Kallak. We assume that Beowulf is authorized to establish the mine in Kallak. Most of it speaks for it, we believe. The prerequisites for entering into partnerships / acquisitions are very good. Beowulf's management, infrastructure for transport, the quality of the ore and low initial investments, because it is a quarry, means that we see Kallak as a very good deal. We also assume that the time to production calculated from today is less than five years. As we pointed out at the previous valuation, there are alternative models that take into account, inter alia, borrowing costs and yield requirements. The models are extremely sensitive to project-specific parameters. Which is also highlighted by those who use the models, as a consequence, comparisons via simple measurement numbers with other design companies are virtually impossible and thus meaningless.
In our estimation of the reasoned share price for Beowulf, we expect what the mine can generate at full break, about 10 million tonnes of raw ore per year. Furthermore, we ignore the fact that the ore is of extra good quality. Average P / E figures 12 based on known Swedish mining companies are reasonable to assume and in light of this valuation, we price Beowulf's share. The number of shares is approximately 500 million.
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