CLE - Cyclone Metals

MR. said:

How can you guys possibly continue to get 90c?

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Easy. It's your 59c

PLUS all that they haven't sold.

Which includes a company up and running with proven management, some cash on hand and another iron ore prospect.

Thanks for the figures Mr.

Have you also factored in the payback of nearly $100m to shareholders by way of special payment and franked dividend (potential)? I'm roughly valueing that as around $3 per share

shaunm said:

Thanks for the figures Mr.

Have you also factored in the payback of nearly $100m to shareholders by way of special payment and franked dividend (potential)? I'm roughly valueing that as around $3 per share

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In my valuation I hadn't mentioned the possible dividend but your $3 is a bit out, a lot out really, more like 3c than $3, but still 3c.

MR.
I now get 59c (not 76c or 63c) and thats without any more options issued!

How can you guys possibly continue to get 90c?

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Hi, Mr,

My calculation is different with your figures, please correct me if I was wrong:

Step 1, calculate the net proceed from the project

Total Consideration: 240m + 80m + 60.5m (which is discount value of 80m in two years as according to the pro forma balance sheet) = 380.5m

Minus: 0.5m transaction expense, 87m taxes, 38m commission

equals: net proceed from the sale of project: 255m


Step 2, calculate the book value of the company after the sale

Net proceed from sale: 255m

Plus: Cash on hand as at 31/03/08: 8.8m (which didn't include the 10m deposit according to the pro forma balance sheet)

Plus: Receivable: 1.1m

Plus non-current asset excluding the project being sold: 8.0m

Minus: payable 1.5m

Net book value of CFE after the sale: 271.4m

Another easy way to get the the net book value of CFE is add 37.7m, which is the return of capital to shareholder from the net equity of 233.6m in the pro forma balance sheet, equals 271.3m

Step 3, calculate the value of options before new issues in July,

98427956 * 0.277 = 27.3m
50000000 * 0.327 = 16.4m
28000000 * 0.377 = 10.6m
500000 * 0.427 = 0.2m
500000 * 0.367 = 0.2m
350000 * 0.49 = 0.2m
Options with strike price over 0.9c will be disregarded

Total options: 177777956
Total value of options: 54.9m

Step 4, calculate share price base on the book value:

Net book value of CFE: 271.4m

Plus: total value of options: 54.9m

Equals: 326.3m

Divided by total fully paid shares 320512270 + Total options 177777956 = 498290226

Book value share price: 65.5c

It will be diluted to 65.1c if all the new issues to employee and director in the July meeting are approved, which I am going to vote against.

Although it is not 90c as I expected, but remember it is just the book value, any future incoming benefit has not been accounted for, and the mining sector have got the average P/B ratio of 1.9 (according the Etrade company profile), which means the CFE would likely be 65.5c * 1.9 = $1.25

I'm a holder for CFE:

evas34 said:

Equals: 326.3m

Divided by total fully paid shares 320512270 + Total options 177777956 = 498290226

Book value share price: 65.5c
:

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Some good Sunday morning detail there. Neatly put forward too. I included some options twice, Oops, not intended. I thought my 600 million appeared a bit high, it used to be about 500 million. The 184 million I thought was CFEO as per page 12 of the "Notice of General Meeting" but is the total of all the options listed below that includng CFEO.
(65c is a good guide) + anything else they might have up their sleeves........

I think the vote for further options will be granted though.

Shaunm, $3- per share? You're not serious. How would you get that? Also any dividends / special payments have not been taken out of that 65c.

Oh shoot, I really ballsed that one up. I meant 30c per share. You can't stop a man from dreaming tho.
sorry

Yesterday I made a blunder. I wanted to sell some CFE and use the funds to buy another share. I ticked buy instead of sell and bought at the top of the market only to watch the SP fall heavily. Today I looked to see if I would take a loss. On checking I see that at todays price it equals a market cap of only $270m. Compare that with EVAS34's $326.3m nett value for the sale of ONLY PART of the companies assets. I have decided to hold the ones I bought as well as the ones I would have sold. These shares have a value far in excess of today's price in my estimation.

nioka said:

Yesterday I made a blunder. I wanted to sell some CFE and use the funds to buy another share. I ticked buy instead of sell and bought at the top of the market only to watch the SP fall heavily. Today I looked to see if I would take a loss. On checking I see that at todays price it equals a market cap of only $270m. Compare that with EVAS34's $326.3m nett value for the sale of ONLY PART of the companies assets. I have decided to hold the ones I bought as well as the ones I would have sold. These shares have a value far in excess of today's price in my estimation.

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Hi Mate. if it is a mistake, it is a mistake. I feel you are trying to justify your mistake.I feel you are not doing the right thing As a sophisticated investor.

ta2693 said:

Hi Mate. if it is a mistake, it is a mistake. I feel you are trying to justify your mistake.I feel you are not doing the right thing As a sophisticated investor.

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Can't agree. Examined the situation on a fundamental basis and that is the cold calculated decision I came to. I'll agree it was a mistake, and a stupid one at that, but look at the figures, the first mistake I did make was trying to sell in the first instance.

Hey guys,

was just crunching some numbers of Magnetite project values and value per tonne etc etc

Anyway it looks like $1 - $2 is the level per tonne Magnetite that some international projects are selling at,

Having said that I was somewhat surpised to discover via calcualtions that CFE is only recieving 82c per Tonne Magnetite given its proximity to infrastructure, ports rail etc etc, perhaps its the lack of a nearby benefication plant or steel mill that reduces its potential somewhat compared to these International sales but I would have thought they could have got at least $1/t?

Here are the Calcs

Deposit = 1.56Billion t's @ 31.2% Fe = 487M tonne Magnetite

Sale price = $400m AUD

= 82c per tonne of contained Magnetite


Could have done better CFE managment, especially if they had waited till after this recent 95% price rise, but thats hindsigth I guess

p.s. I'm not a holder, just passing on some observations

YT you make a good point. However it does not change the fact that the company will have cash on hand well in excess of the market cap. Maybe it is a discount price for an immediate cash sale. The company has other fish to fry. The SP must have the company undervalued.

Good analysis YT, still there's always a price for purity and with that many tonnes, who gives a toss if you don't get premium price. It could be high in phophorus for example, which they would be penalised for by the steel mills, I haven't followed them enough to be sure.

looks like MCC will not get over the finish line unchallenged after all. Can only be positive for shareholders with some healthy competition from the russians.

Quote from The Australian this afternooon

"A MYSTERY buyer has taken a 14 per cent stake in Cape Lambert Iron Ore, worth $15.5 million.

After an enquiry, Cape Lambert (ASX: CFE: quote) is unsure of the buyer but is aware that the holder of the new shares is Merrill Lynch (Australia) nominees.

Merrill Lynch now holds on behalf of itself or clients, 56,050,143 shares in Cape Lambert representing approximately 14 per cent of the issued capital in the company.

Cape Lambert is currently in the final stages of completing a sale agreement with a wholly owned subsidiary of Chinese conglomerate, China Metallurgical Group Corporation.

This sale agreement will see the subsidiary of MCC acquire Cape Lambert’s namesake iron ore project in Western Australia for $400 million.

All conditions of the agreement have been agreed, apart from a vote by CFE shareholders, which is due to occur on 28 July 2008 in Perth. "

Article in AFR re speculation regarding Roman Abramovich

Australian Financial Review's Street Talk column notes speculation Russian billionaire Roman Abramovich is considering making an offer for Cape Lambert Iron Ore (CFE.AU). Newspaper says talk gathered pace yesterday that Abramovich,
who is part-owner of Russia's biggest steel maker Evraz Group (EVR.LN), is behind a Merrill Lynch nominee company that exercised 56 million options, gaining a 14% stake in the company. All eyes likely today on whether Evraz pops up on CFE's register. CFE not immediately available for comment.

Gekko said:

Article in AFR re speculation regarding Roman Abramovich

Australian Financial Review's Street Talk column notes speculation Russian billionaire Roman Abramovich is considering making an offer for Cape Lambert Iron Ore (CFE.AU). Newspaper says talk gathered pace yesterday that Abramovich,
who is part-owner of Russia's biggest steel maker Evraz Group (EVR.LN), is behind a Merrill Lynch nominee company that exercised 56 million options, gaining a 14% stake in the company. All eyes likely today on whether Evraz pops up on CFE's register. CFE not immediately available for comment.

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According to my calculations an offer would have to be $1.15 share to equal the proposition that is offered now. And that value is only based on the nett value of the current sale to china. It places no value on the other assets.

An older article at the link below which explains in more detail what the russians and Delong might be up to.

Best part of this is that Delong will need to ante up before the shareholder meeting on the 28th July or it will be too late.

Will we will see a bid from Delong followed by a counter bid from MCC or will Delong settle for profits ion their strike price of 37 cents for the options?

Either way it can only be good for share holders imo.

http://www.thewest.com.au/default.aspx?MenuId=32&ContentID=77475

Well we should hear something tomorrow i suspect as CFE are in talks today in Singapore with Merril Lynch who are representing the "buyer". Tony Sage MD Prefaced the meeting with some groundwork via the media saying he wants an offer of $1.20 a share minimum.

Quote below and link to full article further down. Getting interesting and very hopeful of some good returns on this one.

Nearly 10m units moved again today so this is getting some attention at the moment.

"Cape Lambert rose as much as 4.5 cents, or 6.2%, to 77.5 cents and traded at 77 cents in afternoon trading in Sydney time on the Australian srock exchange, valuing the company at $249 million. The board will not accept an offer of less than $1.20 a share for the company, Sage said today."

http://business.theage.com.au/business/cape-lambert-facing-takeover-move-20080717-3gr7.html

Also this at Bloomberg

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aE5tckcOoijY

Abramovich's Evraz Buys 16% Stake in Cape Lambert (Update1)

By Jesse Riseborough and Yuriy Humber

http://www.bloomberg.com/apps/news?pid=20601081&sid=ahRZJtHaJVxE&refer=australia

July 17 (Bloomberg) -- Evraz Group SA, the steelmaker partly owned by Russian billionaire Roman Abramovich, bought a 16 percent stake in Australian iron-ore company Cape Lambert Iron Ore Ltd., potentially derailing a bid to sell the company's mine to China.

``It is Evraz'' that bought the holding, Tony Sage, a director in Perth-based Cape Lambert, said today by phone from Singapore. ``At this stage, there has been no discussion of a bid or the price of a bid.''

Global steelmakers are seeking to secure raw-material supplies including coal and iron to help cut costs as prices surge. Cape Lambert agreed in February to sell its iron-ore project to China Metallurgical Group Corp. for A$400 million ($391 million).

``Evraz is building a global business, and their strategic objective is to'' meet all their own iron-ore needs, said Michael Kavanagh, an analyst with UralSib Financial Corp. in Moscow. ``One would imagine they'd go for a full takeover. It's a first step into Australia.''

Cape Lambert, which had disclosed the stake purchase yesterday without identifying the buyer, jumped 6.5 Australian cents, or 8.9 percent, to close at a record 79.5 cents on the Australian stock exchange. The company's London-listed shares gained as much as 12 percent to 38 pence.

Cape Lambert's board met today with representatives of Evraz and Merrill Lynch & Co. in Singapore, and the talks may lead to a takeover offer, Sage said earlier by phone. The board will not accept an offer less than A$1.20 a share, he said.

Second-Richest Man

Abramovich is Russia's second-richest man with a fortune valued by Forbes at $24.3 billion and is also the owner of the Chelsea soccer club. John Mann, a Moscow-based spokesman for Millhouse LLC, the company that manages Abramovich's assets, declined to comment. Tatyana Drachuk, a spokeswoman for Moscow- based Evraz, was not immediately available to comment.

Evraz ``wanted to know, if they had the company, how much it would cost to develop the project, that is obviously their biggest concern,'' Sage said of today's meeting. ``They are considering numerous options.''

Cape Lambert's proposed mine sale to China Metallurgical has received all necessary approvals from Australian regulators and China's government, with Cape Lambert's shareholders set to vote on the sale on July 28. The project may produce about 7 million metric tons of ore a year from late 2009.

Prices for steelmaking raw materials such as iron ore and coking coal have leapt to records this year on rising demand for steel to fuel building booms in emerging economies such as China. Iron ore has gained almost fourfold since 2001 and contract prices for some ore rose as much as 97 percent this year.

Lock In

``The world is short of high-quality iron ore,'' John Veldhuizen, a resources analyst at BBY Ltd., said by phone from Sydney. ``There's going to be more and more of these steel companies going to be trying to lock in that supply.''

An earlier sale of the Cape Lambert project to Chinese investor Ding Liguo, chairman of Singapore-based steelmaker Delong Holdings Ltd., collapsed last October. Ding had agreed to buy a 70 percent stake for about A$240 million.

Evraz said Feb. 19 that it will buy 10 percent of Delong and may raise that in time to 51 percent. Delong makes hot-rolled coils with plants in China's northern province of Hebei.

To contact the reporters on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net; Yuriy Humber in Moscow at yhumber@bloomberg.net

Last Updated: July 17, 2008 05:30 EDT

ta2693 said:

Hi Mate. if it is a mistake, it is a mistake. I feel you are trying to justify your mistake.I feel you are not doing the right thing As a sophisticated investor.

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I hope you are watching as this one unfolds. As I said before the judgement was made on the fundamentals and not to justify a mistake. It looks as though it was a lucky mistake. I had not expected to profit so soon but I'm sure the value is at least on the top side of the dollar. That is based on only the existing deal and with a new suitor emerging any thing could happen in the very near future.

Another nice rise for CFE today. Probably on the speculation regarding the Russian interest. If another offer is to eventuate it will have to be soon as the meeting date for approval of the sale to china draws near. Regardless of which offer succeeds the SP has still room to move. CFE is showing me a nice profit at today's price, even the half that was bought by mistake.