Good points but as I have said in the past the real issue is proving a decent size resource to start with and roll out from that. So the question is, will the market 'get it'? I don't know because it is very unconventional especially for north America. And particularly may not be impressive enough for the quick flippers?
If the PEA can demonstrate positive numbers for a 5 to 6 year mine, game on. I look at the biggest obstacle for non revenue generating venture explorers, money. They raise $500,000, do some drilling and essays. Pay themselves and do it again. And it is a slow process because you don't have easy funds to turn the drills. I gather you trade the PP vs news flow. Fair enough.
But now lets take a lowly $13,000/ ton US ($18,000/ton) on only 1500 tons average per year for 5 years. Forget scalability for the moment. And lets focus on the first year. We have $27,000,000 revenue. Is it realistic to use a costing of $4400/ ton or $6600 total cost (all in, thermal blah blah) thereby leaving $20,400,000cdn GM? Ok, lets subtract the SGA expenses so SGA of $1,500,000? Is that realistic? If so, we arrive at $19,000,000 pre tax income. What is the tax rate? 27%? If so, we have $13,870,000 net graphite income. Of course there is opex to consider? Clearly after 2 years running, the plant Capex is paid. Would this not be a good scenario? Why would you not invest in such a business model? Low volume and high margin with super low up front costs. Scalable, robust business model and low opex. How do people not get it?
So this still gets better because we omit the marble. Contract is 75K tons at lets say only $140/ ton average, or
$10,500,000 revenue. Is it realistic to assume $45/ton cost? I think it is, so $7,100,000 GM. I'll take $1,200,000 SGA off and same 27% tax leaving $4,200,000 net marble income. Is this not a decent business model?
Combining marble and graphite gives over $18,000,000 after tax net income! Tell me what is wrong with that model? Base case is $0.18/ share and 5x P/E near $1.00/ share.
Based on this, can we see 16 months capex payback period! What is wrong with this model? If this is even remotely in the ball park, year 2 should net some $12,000,000 after tax income.
So, how fast can they get the drills running and trenching etc to bring up the next phase? Pretty easy when you have money. Of course I assume they will continue to define the resource. Given the possibility of the recovery as low as .53, ( See NR update) Chiefs 40K tons for this east area as he defined it is not a stretch in my opinion. That NR revealing the 0.53 measured as the bulk pilot plant was big news. What we don't know is the economics with and without, vs resource size with or without.
If you are looking for a zen sized 1.4 million resource, it is not going to happen. And zen resource is still useless until the issues sort out, if they ever will.
CCB about to turn into revenue/ profit with future growth. Tell me what I am missing? What is not to love? The flippers might want something different, sure. No such thing as long. But what about funds? I'm sure they are always short with their PP warrants in plays with no revenue. Dilution after all. But a small operation with an awesome IRR over 40%, probably approaching 50%. What is not to like? Who would not want to be involved in this? |
