RE: Next 2 years ?1 Jun 2021 20:41
So just a gentle reminder of what we’re weighing up here with UFO. And I would genuinely welcome comment from others where far greater experience will illuminate my crude crayon-style calculations.
If you’re familiar with distribution-curves, then you’ll understand the idea that there’s various ways of carving up a probability, but we could keep it simple and say there’s a 20% likelihood of the bottom value scenario playing out, 20% chance of the top-valued scenario, and a 60% chance of the most-likely middle value happening.
With UFO at a MCAP of £40M, we can apply that distribution curve to what may/may not happen in the next two years or so – and to keep things simple, this is ONLY on the iron.
Bottom 20% scenario (IE: low values on everything because it's all rubbish and we're unlucky):
Only 50Mt of iron @$200 per ton = $10Bn.
90% of it to Alien thanks to last week’s bonza news = $9Bn.
Divided across 20 years mine lifetime* = $450,000,000pa
Mined on a JV for 20% = $90,000,000 per year
Exchange Rate of 1.3 = £70,000,000 per year.
If MCAP = 3 x multiple of annual turnover, then £210M = undiluted SP of 5p
*except a smaller mine will have a shorter lifetime, so greater value per year
Top (ie: top end values on everything because the world shines on UFO shareholders)
240Mt of iron @ $200 per ton = $48Bn
90% of it to Alien = $43Bn
Divided across 20 years mine lifetime = $2,200,000,000 pa
Mined on a JV for 25% = $550,000,000 per year
Exchange rate of 1.3 = £423,000,000 per year.
If MCAP = 4 x multiple of annual turnover, then £850M = undiluted SP of 21p
Middle ( a broadish range of values suggesting the most likely path)
120Mt of iron. All the same calculations, but keeping the JV at 20% instead of the more optimistic 25% in the “Top” example = £165M income per year.
Equals MCAP at roughly £500M = undiluted 12p SP.
Obviously there’s also the silver, copper, gold, zinc, PGM, and whatever else Bill can unearth. So these values are all a little low, but actually might be counterbalanced by some dilution (if needed once the EH tailings are proven and generating income).
For transparency, I have opted for a three-times income multiple because a line has to be drawn in the sand somewhere, and Price/Cash Flow would be similarly open to interpretation at this point. I would welcome a steer from those with more experience in the exploration sector on that point.
So we can fret about the short term SP, or feel confident that - at absolute worst - we're looking at 4 bags over the next two years. All IMO, of course. I am not a professional advisor/analyst.
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