AGM - Allegiance Mining

[chops_a_must]

How on Earth does this have a market cap of 600 million?

The peer review just does not stack up here.

 

[chicken]

How on Earth does this have a market cap of 600 million?

The peer review just does not stack up here.

easy...do some figures....158000tons times..$50000....=many Billions of $$$$.....the profits now you work it out is in many hundreds of million$$$ and you say how does this have a market cap of 600 millions...DOYR...and you will see why...

 

[chicken]

Also, have a look at Kitco...the price per lb of Nickel...highest I have seen...AGMs contractors are mining the ore ready when ballmill is installed for the last quater for milling the ore before shipment to China..agreement of $1.5billion with chinese company......

 

[joeljp]

And not to mention the reserves are growing every time they drill! Oh look.. more nickel

 

[chris1983]

How on Earth does this have a market cap of 600 million?

The peer review just does not stack up here.

Okay..lets do a rundown of AGM for chops and others. I dont know if this justifies AGM to have the Market Cap that they have but I think it does.

Total Class Issue: 682,489,766
Market Cap (Undiluted): 580,116,301
contains 158,000 tonnes Ni in resources

Below are some major factors that show the potential for Allegiance to have a huge nickel province.

• Discovery of second deposit (Saxon-East Avebury) in late 2006
• Discovery of a possible third deposit (Bison) in February 2007
• Saxon deposit and Bison deposit discovered within 1.5 km (~1 mile) east of Avebur.

Nickel is around $45,000/tonne so if we used this figure to work out the inground value we would get.
158,000 x 45,000 = 7.11 billion inground value and this resource will increase further

Allegiance have allready sealed deals to sell their nickel. Its just a matter of getting everything off the ground now. Jin chuan are a very strong partner to have.

• US$2.2 billion offtake agreement & partnership with Jinchuan Nickel Group, China
• 8,500 tpa Ni in concentrates – offtake by Jinchuan Nickel, China

We also have the figures in regards to Allegiances yearly tonnage and operating costs. see below.

1. Marketing Yr 1: 28,800tpa concentrates (+20%Ni) = 5,700tpa Ni
2. Yr 2+: 43,000tpa concentrates (+20%Ni) = + 8,500tpa Ni
3. Milling Simple 900,000tpa ball mill & flotation with 80-84% recovery
4. Cost setting Mining A$35/t, Milling A$20/t = Low operating costs
5. Overheads & Marketing A$13/t , Total C1 Opex A$68/t ore

So now with all that we know I think you can work out an estimate for what Allegiance will be earning yearly. At 5700tpa Ni working off say even just $30,000/tonne this would bring in total revenue of around

5,700 x 30,000 = 171 million dollars.

At 8,500tpa this would bring in total revenue of

8,500 x 30,000 = 255 million dollars

Now to work out the companies profits we have to work out yearly tonnage and operating costs. Easy way to get an estimate of this is that the ball mill can handle 900,000tpa.

900,000 x 68 = 61.2 million dollars

We can now work out the profits

At 5700 TPA Ni the company would bring in a profit of
171 – 61 = 110 million dollars
NPAT = 77 million dollars at 5700 TPA Ni

At 8500 TPA Ni the company would bring in a profit of
255 – 61 = 194 million dollars
NPAT = 136 million dollars at 8500 TPA Ni

Remember I have worked out these figures off $30,000 a tonne. No one knows what the agreement with Jin-chuan was but it was supposedly amonst the highest paid for nickel concentrates.

Is this realistic? If anything is wrong..pull me up..I just wrote this up before I go out with the misses today so dont jump down my throat too much . I would also say for the first year they would have a lot of losses carried forward so this will help in regards to the tax they have to pay for the first yearl. I think its fair to say that once AGM get up and going they are going to be travelling nicely. It takes a large mine to give a company the boost they need to expand and AGM look to have that.

 

[grayps]

Thanks for a very good post Chris, though I think the "Total C1 Opex A$68/t ore" may be an old figure swamped by major rises in mining costs.

Good luck all who hold,
grayps

 

[chris1983]

Thanks for a very good post Chris, though I think the " Total C1 Opex A$68/t ore" may be an old figure swamped by major rises in mining costs.

Good luck all who hold,
grayps

ahh..yeah that figure was from the 21 Feb 2007 15:21 AGM Conference Presentations announcement..but when I went back and checked those figures from the presentations slide it is headed "DEC 05 feasibility study outcomes" so you have a good point there. The costs definately would have risen..but I did hear Tasmania is good for labor costs etc etc so we will still be okay.

 

[nizar]

Chris,

Wat p/e do Nickel producers normally trade at?

Thanks

 

[chris1983]

Chris,

Wat p/e do Nickel producers normally trade at?

Thanks

SMY have a PE of 22.6. Jubilee have a PE of 11.95. Both those PE's will increase though. AGM's PE will be healthy compared to the two even if their profits are based off $30,000/Tonne.

 

[jj0007]

ahh..yeah that figure was from the 21 Feb 2007 15:21 AGM Conference Presentations announcement..but when I went back and checked those figures from the presentations slide it is headed "DEC 05 feasibility study outcomes" so you have a good point there. The costs definately would have risen..but I did hear Tasmania is good for labor costs etc etc so we will still be okay.

Increase the the opex by about 20% and you still get a very good outcome.
Good post for chops....

 

[pennystock]

Hi Everyone

So on the figures that Chris has kindly produced, what could be the share price of AGM in 2 to 3 years time of course assuming everything goes to plan. I know ppl will reply back with "How long is a piece of string and we don't have a crystal ball" but some educated guess would be nice.

CHEERS

Pennystock

 

[chris1983]

Hi Everyone

So on the figures that Chris has kindly produced, what could be the share price of AGM in 2 to 3 years time of course assuming everything goes to plan. I know ppl will reply back with "How long is a piece of string and we don't have a crystal ball" but some educated guess would be nice.

CHEERS

Pennystock

Its very hard to say Pennystock. What will Nickel prices be in 3 years time? I would say they will still remain strong due to China and India expanding but anything could happen. How much larger will their resource get? It continues to grow and it is all in close vicinity to one another. What will they do with the profits they get? expand is what they will be doing. Its fair to say AGM is on their way to building an excellent company and they have laid a great foundation to expand. I'll continue to hold these for atleast another 10 months and see how things are progressing after that time period. I would give a price prediction..but would get pointed out for doing so as we aren't supposed to post price predictions. I'll tell you what I think though. The SP will be substantially higher than what it is atm. Thats just my opinion. I don't see it with much risk either..whole reason why I put the gf's money into this stock Go AGM!

 

[nizar]

Pennystock.

Chris is probably spot on with his analysis (seriously, look at his record), and AGM will probably be higher in 2-3 years, but i can guarantee there WILL BE corrections between now and then.

Its not how you pick the winners but rather how you trade them. So if you buy now, ask yourself where will the initial stop be, and where is your exit. Or if you are a permabull and intend to hold all the way, stick to that plan.

Do you have the balls to hold through 20-30% share price corrections (i dont) ?

I know Chris does, and thats why hes cleaned up thus far.

 

[joeljp]

Chris, has your g/f made grand plans to spend the profits yet?

On a more serious note, once AGM starts to produce where do you see AGM in the pecking order of nickel companies (in australia)? Do you see it fit in around SMY & MCR or higher up with MRE and JBM?

Anyone else like to take a stab at this, please feel free to do so.

 

[Freeballinginawetsuit]

SMY have a PE of 22.6. Jubilee have a PE of 11.95. Both those PE's will increase though. AGM's PE will be healthy compared to the two even if their profits are based off $30,000/Tonne.

Chris,

your PE's are off the mark on a 'current view'. PE's are also void of mine lifes/forward production profiles........ that precipitate enterprise value/forecast revenue.

I agree with Chops on this one (investment wise), AGM dosent stack up to its Nickle producing peers/relative to its market cap.

From a Trading perspective AGM has plenty of speculation from its 'mean value' , how you chose an exit/entry should be approached accordingly!.

 

[chops_a_must]

Chris,

your PE's are off the mark on a 'current view'. PE's are also void of mine lifes/forward production profiles........ that precipitate enterprise value/forecast revenue.

I agree with Chops on this one (investment wise), AGM dosent stack up to its Nickle producing peers/relative to its market cap.

From a Trading perspective AGM has plenty of speculation from its 'mean value' , how you chose an exit/entry should be approached accordingly!.

The problem that I see in it, and what differentiates it from other nickel miners is the cut off grade. SMY, MCR and others all run at a significantly higher % of nickel content in their ore. This enables them to run costs very low.

158,000 tonnes over 19 years or something (upside case) just cannot stack up with SMY at 20,000 tonnes for the next ten years or something ridiculous.

AGM have a market cap similar to MCR and they haven't really even earnt anything. I mean yeah, if nickel prices keep going up for ever and ever, this will do well, but the market is benefitting miners that are ramping up production right now, and are at peak production RIGHT NOW, not in 3-4 years time.

 

[chris1983]

Okay this is for chops and freeballing.

At a share price with AGM at 85 cents lets work out what the PE would be for the company if the figures below were being realised. These figures will be realised in time also. Production is getting closer.

At 5700 TPA Ni the company would bring in a profit of
171 – 61 = 110 million dollars
NPAT = 77 million dollars at 5700 TPA Ni

At 8500 TPA Ni the company would bring in a profit of
255 – 61 = 194 million dollars
NPAT = 136 million dollars at 8500 TPA Ni

Lets also put the PE's of MCR, SMY and JBM

JBM PE: 11.95

SMY PE: 20.53

MCR PE: 11.72

Okay now lets work out the PE for allegiance if either the 77 million dolars or 136 million dollars NPAT was realised.

at 77 million dollars profit AGM's PE based off an 85 cent SP would be
Earnings/share = 77,000,000/682,489,766 = 11.28 cents/share
PE would then equal 85/11.28
PE = 7.54

at 136 million dollars profit AGM's PE based off an 85 cent SP would be
Earnings/share = 136,000,000/682,489,766 = 19.9 cents/share
PE would then equal 85/19.9
PE = 4.27

At these figures AGM are looking pretty good to me. Compared to its peers it needs to rise a lot more and the closer it comes into production the further SP gains we will see. Its still cheap atm IMO.

AGM are in Tasmania..the costs of production are low. Below is taken from one of their presentations.

Excellent nickel concentrates

Avebury 20% plus nickel concentrates will define a new global benchmark:"Nothing but Nickel" and command a premium price

Low cost mining. Mine & infrastructure established!

Typically A$30/tonne: Milling is less than A$20/tonne; Overheads less than A$8/tonne; Marketing lessthan A$6 tonne

 

[Freeballinginawetsuit]

Chris,

I am not to familiar with AGM, just that its a Nickler near production with a decent resource. No idea on mill capacity/cut off grades/off take aggreements etc.

It is clear that in recent times/pre production AGM has had significant share dilution (large SOI), its current CAPEX position to facilitate ramp up?, bank debt facility etc. Maybe its fully funded to production stage.......if so thats great .

AGMs MC is 600M................and they are yet to produce. Seems pricey to me.


How you can possably compare AGM to a peer producer that has a MC of 900M, close to 100M in the bank virtually nil debt etc..... and in all likelihood will produce 20K NI in 08/09 is beyond me.

SMY's PE a mere 3 months from the end of the Fin Year can reasonably assumed to be around the 10 mark.


Financials 06/07 (forward view 30/06/07)- on an average Ni price of 40K from 01/01/07/30/06/07.

06/07 Full Year NPAT: 70M (Estimated).
Cash on Hand/Receivables: 130M (Estimated)
EPS: 43.5c (Estimated)
P/E:10.7(Current SP)
SP: $4.64 (Current)
SOI : Approx 187 Mil
MC (Fully Diluted): Approx 900M (Current)
Senior Debt reduction (Production CAPEX): 32M 05/06 to 6M (Estimated)

 

[chops_a_must]

Okay this is for chops and freeballing.

At a share price with AGM at 85 cents lets work out what the PE would be for the company if the figures below were being realised. These figures will be realised in time also. Production is getting closer.

At 5700 TPA Ni the company would bring in a profit of
171 – 61 = 110 million dollars
NPAT = 77 million dollars at 5700 TPA Ni

At 8500 TPA Ni the company would bring in a profit of
255 – 61 = 194 million dollars
NPAT = 136 million dollars at 8500 TPA Ni

I'm new to F/A, and I may be wrong.... but:

I think what you are missing out here is that MCR's and SMY's etc PE's are after tax. Because both are doing these numbers in one half. So really, there is something amiss here.

Also, I have no idea where this number 61 comes from.

 

[chris1983]

Read my first post on this page. You will see where the 61 comes from.

NPAT is also after TAX. I havn't missed anything. If there is something else I have missed please point it out. Freeballing you seem to only like stocks that are in production. AGM will be in production soon. Your limiting yourself by only looking at stocks in production. AGM will be an assurity into production so if you work out the figures early there are lots of profits to be made. I was in at 36..but I still think investors buying now will see rewards. My figures were based off Nickel at $30,000 a tonne and nickel is $45,000 a tonne. Also AGM have allready onsold their nickel to Jin Chuan group.