Did you see Dr. Berry's comments today?
"POLYMET
In the not too distant future I will be distributing a valuation report on Polymet. I have
followed the stock for over 1 year and I am convinced that it is becoming a Legacy stock.
Here’s why. The company is literally sitting on between 500 million and 1 billion pounds
of ore rich in copper, gold, platinum, cobalt and nickel. The project is called the
NorthMet project. NorthMet is 100% owned by Polymet. It is located in a well known
mining district of the Mesabi Iron Range in northeastern Minnesota. Teck Cominco is a
neighbor with a significant interest in the area. More important POM’s deposit is in the
continental United States. The company has a fully functional plant, the Erie plant, which
it purchased from Cleveland Cliffs. The plant is located 6 miles from the ore body. There
is a rail link to Lake Superior which is approximately 40 miles to the east.
Sound too good to be true? It is true and demands your attention, now. Even though the
discoveries of its ore body have been made and I think the metallurgical problems solved,
the value has not yet been recognize by the market in POM’s share price. This company
could be in metal production in the fourth quarter of 2008. Mine production is slated for
mid year 2008. POM will be the only nickel producer in the United States. Yesterday the
company announced it was on track for 2008 production from its mine and plant.
Specifically, the company said in its press release yesterday,
“William Murray, President and CEO of PolyMet stated, "We are very encouraged by
the cooperation we are receiving from the State of Minnesota to maintain the timeline
to start commercial production. Not only is this timeline important for PolyMet, it is
also important for the State and for the local communities to ensure that the creation
of up to 1,000 construction jobs and at least 400 long-term, high quality jobs is not
delayed unnecessarily."
The company has 125 million shares outstanding on a fully diluted basis. I do not see a
need for much more equity financing in this case. Cleveland Cliffs owns 6% of the stock
and management owns about 12%.
With a market capitalization of $400 million this company could show annual EBITDA
of $175 million. If so, the IRR would be 27% and the NPV nearly $600 million from the
first 5 years of operation. These numbers are based on $1.25 copper and $5.60 nickel. If
management executes on time and to expectation, this will be a very significant wealth
creator over the next decade. Where will the company deploy its future cash hoard?
Please consider this developing Legacy opportunity. Nickel is $15 per pound today and
copper slightly over $3.00. Therefore, I believe the valuation is quite conservative. I am
an advisor to Polymet Mining for which I received stock options that vest over time." |
