Howard: Gladly.
"Not so....2,500 oz x ($330 - $75) = $637,500 gross profit per day. Multiply this by 350 days per year and you get $223 millions yearly. Looks like you missed a factor of 10 here.'
Assuming the cost of extraction per ton of head ore at $75 (and if someone has a better substantiated figure, we should use it), you get $300 cost per ounce, since you need 4 tons of ore per once of gold (if indeed we have .25 oz/ton, which we have only the company's world for right now, they did fool us before, so allow me some slepticism). In my calculations I have used only 300 days per year, since even the steel and glass industry's (the most unitterupted similar process) calculate only 300 working days in their facilities. But if they can have 350 days year in year out of operations, take 350 days.
"IPMCF has the right to 90% eventually. Check it out on their Website. So, $223MM x 0.9 = $201 MM."
I have taken 70%, since I assumed that they will not have the ability to deliver 10,000 ounces of gold by April 1997. This is the clause descibed in the 1995 annual report page 15 (paragraph 6.c) I could have been more conservative and taken only 50%, since they need to show (and I cannot find by when) a sustained production of 10,000 tons/day to earn that additional 20% (same paragraph). I have not found reference to 90% ownership in the annual report, and web sites are less accurate than annual reports. (they could delay the delivery of 10,000 of gold to October 1998, but their is a 1% per month penalty (and it is not clear to me what this 1% per month is, increased amount of gold delivered, or reduction in the additional percentage they can earn, so I simply did not take this into account, if you feel sure about it use 80%).
<<of which they get to keep after taxes, lets be generous, 60%>>
ASs far as I know, the statuary income federal income tax rate for C corporations ( after the first $50,000 in earnings) is 35%, add to that local and stae taxes (which I have no idea what they are and since it is federal land, a possible royalties to the Fed, all together at at 5%, since I had no other information. In my state the state income taxes for corporations is 10%, so I felt my 40% total tax rate to be indeed conservative. If you have other data, please recalculate accordingly.
Now, as to valuations, yes, some people posted here that Barrick sells at 6.5 times sales and I believe 20 times earming (feel free to correct me), but I think these are not "normal" times and a standard valuation on future earnings of 10 times is not too conservative, particularly, when a lot of Murphy's intrusion can happen between now and those earnings.
The real question is whether my approximation of $75/ ton of head ore is too penalizing. All I am saying is find out what the expected costs are going to be. Do include the cost of capital, whether it is a bank loan or equity. If they have to borrow $100,000,000 ($1000 per a ton/day of production, and Jack, you have some experience in that, what would be the cost of a high temperature tank to process let say 100 tons/day, and you need a number of these in cascade, as well as material handling equipment, grinders to 400 mesh, replacement sieves every so often since this stuff is quite abrasive etc.).
Now, in response to someone else's querry relative to quantity of reagents required, if indeed what is contemplated is dissolution of the quartz matrix, you need pretty close the same molar concentration of the hydroxil ions as the silicon ions, and thus (considering the lower molecular weight of sodium and potassium hydroxide relative to silica) a one to one weight requirement is not so much out of the question.
Zeev |
