CLE - Cyclone Metals

[MR.]

Dont you love it when things play out as predicted. Now we just need a few announcements to confirm everything!

Yes those "announcements" I am sick of this waiting. It made me sell 1/2 my holding in CFE 2 weeks ago. Although yesterday I did pick up some CFEO at $0.38 (because I couldn't stand missing out) only 1/4 of the value I sold in CFE.
I'm going to get a life now and do something else. Its hard not to watch!
Hope the day goes well for the holders.

 

[mahmoodf]

Hi all

Like everyone else, I am hanging out for this announcement.

In the meantime, I did some numbers. Based on data in the General Meeting notice from yesterday, I tried to figure out what MCAP to cash ratio Cape would have IF:

1). The Ding deal goes through.
2). All options are exercised, even the $1.40 ones.
3). We have a SP of $1.40.

Please see attached spreadsheet for all the information. It shows that at a SP of $1.40, Cape would have a fully diluted MCAP of close to $736 million with a MCAP to Cash Ratio of 2.2. I am very comfortable with that.

Here is an article I found that explains this ratio a little better.

http://www.dealmakerdaily.com/column/4/4236.html

I would be interested to hear what others think.

 

[moneymajix]

More good news. Up in London tonight. Not sure who follows who.



CLIO CAPE LAMBERT GBX 31.75 +3.50 +12.39

 

[nomore4s]

Good day today, have a look at the volume. Highest since the massive volume before CFE went into trading halt and the deal was originally announced.
People wanted in today, do you reckon this company has a leak?
I'm betting the confirmation isn't too far away now, hopefully early next week. And judging by the volume and price today I'm also betting that they've got the 300mt, but we'll find out soon enough either way.

 

[Porper]

More good news. Up in London tonight. Not sure who follows who.



CLIO CAPE LAMBERT GBX 31.75 +3.50 +12.39

Good rise yesterday and a close on the highs would suggest that we haven't reached the intermediate wave 5, larger degree wave 3 yet, although theoretically we could have.

My technical outlook below, but from a fundamental point of view the Ding deal must be factored into the price now, it seems from announcements that it is a formality.Will it be a buy the rumour sell the fact reversal ?

 

[Ruprect]

It would be hard to imagine a reversal, although yes, it is starting to hit around the mark of where we first thought the sp would be when the deal was confirmed. But 2 things.

Firstly, i think that in this current hot iron ore climate, with an upward trend on the ore price and continued demand, we may well have underestimated the target price.

Secondly, although there are some traders in on this one, waiting for the expected bounce from the deal (buy on rumour, sell on fact), i expect them to be offset by the investors who will now buy this stock for the long term potential. Explorer to Producer, with the added bonus of spin off of Global Iron as a spec play. Indeed im sure there are some who have already done so, with others waiting on the sidelines for the deal to be confirmed.

As an observation, because the CFE sp has settled for the past week or two around the 66-76c range imo it hasnt totally factored in the deal so the confirmation will see some more traders head into the stock, potentially pushing the price higher in the short term. The excitement surrounding a major announcement will generally cause a price spike, usually with a retrace a day or two later, but all things being equal, usually above where the sp was prior to the announcement. I also dont think we can underestimate the value of the media in this one, a major Chinese deal confirmed should cause some extensive coverage, bringing CFE to the attention of a wider audience.

When the deal was orignally announced, subject to confirmation of resource etc, the sp opened at 60c. We are only 16c above that, with the confirmation of the resource approaching very soon.

 

[skint]

It would be hard to imagine a reversal, although yes, it is starting to hit around the mark of where we first thought the sp would be when the deal was confirmed. But 2 things.

Firstly, i think that in this current hot iron ore climate, with an upward trend on the ore price and continued demand, we may well have underestimated the target price.

Secondly, although there are some traders in on this one, waiting for the expected bounce from the deal (buy on rumour, sell on fact), i expect them to be offset by the investors who will now buy this stock for the long term potential. Explorer to Producer, with the added bonus of spin off of Global Iron as a spec play. Indeed im sure there are some who have already done so, with others waiting on the sidelines for the deal to be confirmed.

As an observation, because the CFE sp has settled for the past week or two around the 66-76c range imo it hasnt totally factored in the deal so the confirmation will see some more traders head into the stock, potentially pushing the price higher in the short term. The excitement surrounding a major announcement will generally cause a price spike, usually with a retrace a day or two later, but all things being equal, usually above where the sp was prior to the announcement. I also dont think we can underestimate the value of the media in this one, a major Chinese deal confirmed should cause some extensive coverage, bringing CFE to the attention of a wider audience.

When the deal was orignally announced, subject to confirmation of resource etc, the sp opened at 60c. We are only 16c above that, with the confirmation of the resource approaching very soon.

I tend to agree with those sentiments Ruprect. Other FE players have just continued to rise as they progress from explorer to producer. No doubt some will sell into the confirmation, but as you pointed out other more risk averse players will enter on confirmation. What may have not been factored in (and what may provide a further catalyst for a continued run) is the updated resource model that's due out in late July. A substantial increase in the resource may put some more wind in the sails. Although the SP may run, retrace, run again etc.. in the short term, I'm happy to be holding for longer term gains. Other FE miners have increased steadily (and often dramatically) as production approaches and I'm holding on the expectation that CFE will follow suit. Good luck to all.

 

[Go Nuke]

Well Im happy to say thta I have now joined the CFE bandwagon, although i wish i had done so when I first heard the Cptn mention it. It was about 42c then

Iron ore is still hot property and as I posted a link on the HLX thread, RIO is set to continue expansion work of their Iron Ore facilities to increase output in the comming years.

Lets see what happens from here.

 

[MR.]

Ruprect, Skint,
I agree with both of you. So many iron ore plays have by far out performed CFE over the last few months. Cfe had the deal announcement included and has not gained as much as others. We could easily under estimate CFE's gains in the short term if we were not careful.

I purchased CFE over many Hematite companys because they all seemed to be in the middle of nowhere with resources not large enough for me to be interested in them. So many of these have gained far more than I expected. In fact it has appeared "just buy any Iron Ore company YOU CAN'T GO WRONG."
CFE can be shipping before so many others using their own transport and Port.

Mahmoodf
Happy to have a look at your CFE.xls file but I can not read this file. (My system is too old) Can you post it on the forum? "$1.40" I don't know how you have come to this figure but would like to investigate.

 

[nomore4s]

Qoute:
"Mahmoodf
Happy to have a look at your CFE.xls file but I can not read this file. (My system is too old) Can you post it on the forum? "$1.40" I don't know how you have come to this figure but would like to investigate."

Here you go MR.

 

[mahmoodf]

Happy to have a look at your CFE.xls file but I can not read this file. (My system is too old) Can you post it on the forum? "$1.40" I don't know how you have come to this figure but would like to investigate.

MR., what system are you running buddy? Windows 82?!!???

I used $1.40 as a base point so that all oppies would be in the money so to speak.

What I was trying to get a figure on was what if every oppie was exercised, what sort of MCAP and MCAP to Cash ratio would CFE have if they had a share price of $1.40.

In this scenario, Cape would have a value of $333 million due entirely to cash reserves and $400 million for its other assets. Not too shabby at all.

 

[smoothsatin]

My technical outlook below, but from a fundamental point of view the Ding deal must be factored into the price now, it seems from announcements that it is a formality.Will it be a buy the rumour sell the fact reversal ?

Hi, i suspect that won't be the case, for a few reasons:

1) the grade of Ore is higher than most expect (i.e roughly double the required level)

2) The price didn't rise last time because (in part) so many people were down after buying at .6 and .7 6 or so months earlier, so just wanted to get out, which formed a classic cup, bottoming out at .4. We are blue sky now.

3) Continued Institutional buying over the last few weeks shows their commitment to the stock and are likely to overpower any selling pressure/profit taking.

Anyway, only time will tell....

 

[MR.]

mahmoodf,
Yes I need a new computer but usually does the job intended.
OK, now I know where the $1.40 came from its just a base point. You had me stumped. The only flaw I see in the calculation is that although it will have a lot of cash (at the moment) we don't have anything else. What good is the iron ore sitting in the ground unless we are going to sell the 30% stake as is. We need the money to build the mine. I don't think its worth $1.40 using your calculations.

I see that CFE is worth "as straight forward calculations go" $250m + cfe 30% = add all this together including all oppies and I see the figure being where the share price is roughly today. Information like the deal looks like it is $192m usd not 250aud and the 10m finders fee etc. etc. lowers our original calculation.
So for the future CFE is worth somewhere between the current price and ($3- which I posted earlier) I find it too hard to calculate a figure on the way to production its just what people are prepared to pay at any given time. I'll leave that to the so called experts.

 

[mahmoodf]

I don't think its worth $1.40 using your calculations.

G'Day MR.

I never it said it was worth $1.40. I was just proposing a "what-if" scenario to see what sort of MCAP and MCAP to Cash ratio Cape would have at $1.40.

I used $1.40 as a base price to allow for the exercise of all options and for the full dilutionary effect to be in play.

What my analysis tells me is that at this price, if you strip out all cash from Cape, there is about $400 million worth of value left over, above and beyond the cash value.

That is pretty cheap for a company that potentially could be mining 10Mtpa or more from a 2.5Bt resource for 20 years plus.

That is why I am really keen on seeing what the BFS comes up with. I like your base calculations as well where you used a 15Mtpa operation.

I agree that the value is somewhere between here and $3.

Personally, at $1.40, I think that Cape would still be cheap based on my analysis, the analysis that you and others have conducted and what other emerging iron ore producers are being valued at.

 

[Ruprect]

The way i read it is, if all options (minus the 90c and 1.40) are converted, there will be 542,553,003 shares on offer.

The deal, 192.5m us, will convert to around 227m au, not 250m. Or did they do the deal in AUD and just use USD for the announcement? If its USD the currency has weakened since the deal went through.

After bankable feas, tax, transaction costs, CFE estimate they will have $33 million woking capital based on the 250million AUD. However, i would expect that to reduce to around 12+ million, dependent on currency levels at time of conversion, and the reduced taxation costs because of lower currency.

However, with the options converted (minus the 90c and 1.40), the cash position should be: Options - 76mil, Working Capital - 12mil, Cash at hand - 6.5mil - for a total of 94.5million, give or take.

Then we have the $120mil, spent for the 30% JV costs for the mine, which can only be classified as an asset.

In addition, there is the value of the resource, which will be dependant on commodity prices. I will leave that for others to determine.

At current sp, mcap with options converted would be 412m. I think that is undervalued, based on cash position which will open up other opportunities in the future, and the long term basis of the mine itself, from 10-15 years, perhaps longer. With the demand and prices for Iron Ore predicted to remain strong for the medium to long term, this bodes well for the long term future of this project.

 

[Go Nuke]

Does anyone think today might be the beginning of a retrace? or just down becasue the market is down?

I know its had a big run so maybe its just a pause

I bought in at the mid 70's so im thinking of selling and probably buying in again on the retrace

 

[Ruprect]

Its hard to see it as being a retrace. Its only down slightly from its Friday close, with the options up today. Trade was heavy, and buy side still looks quite strong.

It did hit a high of 80cents today, so there still looks to be some strong interest in CFE.

It should hold relatively firm while we wait for a confirmation of the deal. And if that is positive news, it should take another run.

 

[mahmoodf]

Does anyone think today might be the beginning of a retrace? or just down becasue the market is down?

I know its had a big run so maybe its just a pause

I bought in at the mid 70's so im thinking of selling and probably buying in again on the retrace

I guess that depends on your trading style and strategy Go Nuke. If your horizon is 24-30 months, then 5 cents here or there will not make much difference when there is a high liklihood of Cape being a $2+ stock (please see earlier research on this thread).

I don't know what the stock is going to do post announcement. I am going to take a small profit and hold some core stock as I think Cape are a beaut little company with everything in their favor: large resource, close to shipping and good management (Dr. Ian Burston).

Dr. Burston's connections cannot be discounted (former MD of Portman and Hammersley Iron). Burston rates right up there with George Jones.

Good luck with whatever you decide to do.

 

[Porper]

Does anyone think today might be the beginning of a retrace? or just down becasue the market is down?

I know its had a big run so maybe its just a pause

I bought in at the mid 70's so im thinking of selling and probably buying in again on the retrace

Well, today certainly wasn't good.Tried to push higher but sellers over powered buyers and finished near the days lows.

I would call this 1 each after Fridays rise.Next couple of days will give a better picture, but I would keep fairly tight stops.

 

[Go Nuke]

Well im going to hold.

I haven't really got enough for it all to be a big deal anyway. Just had some spare cash after selling out of CYC, so thought I couldn't go too far wrong with CFE.
It was either CFE or MUN (Mundo Minerals..which of course went up 25% today)

Hammersley Iron eh...my dad worked for them for years.
I grew up in Tom Price you see
Iron Ore is in my blood..lol

Thx guys.