DMM - DMC Mining

Sean K · 6 May 2008

Hopefully the JORC`s at the higher end of those expected LN.

I`ve held some for some time and was lucky enough to have picked the bottom to top up and reduce my average price to 50 cents, so looking ok from where I sit! In the Gran Sabana in SE Venezuela!

I don't think there`s much country risk with this, and infrastructure looks good. Would be surprised if they took this to production themselves. Probably a farm in by a big player? Didn ´t they do some sort of roadshow in China recently?

Risk will be the JORC is at the lower end and the market`s anticipating more, especially since their ramps of 800Mt target! Would be nice if they can make that claim again due to the desk top study.

Gekko · 6 May 2008

YOUNG_TRADER said:
Alan I thought that too but then after I saw the re-assayed drill holes I changed my mind,

Like ACS and YML I knew it was only a matter of time for them to get a JORC, DMM in a lot of ways reminds me of YML (now BRM)

tiny unloved company trading at a huge discount to what it should be

The JORC should make peopel take the company more seriously, I've done some rough calcualtions and I'm expecting 20Mts-40Mt's@57%Fe @ $10/t Fe EV = $114m - $228m

= NET 80% DMM $91m - $182m

Using 60M shares fully diluted = $1.50 - $3 DMM share price

Like I said YML/BRM all over again

p.s. See the re-assayed drill holes

Note the reason I'm expecting the intial JORC to be so small is because only a very small part of the entire project was drilled on a closed space drilling grid which is required for the JORC, the rest of the drilling was wide spaced exploratory type drilling

Compared to AGO (mkt cap $1b) and BRM (mkt cap $300mn) it looks favourable and very cheap.
I just hope it doesnt run like the above when their resuults came in as i want a chance to buy

.
Do you have a price target YT?

alankew · 6 May 2008

Gekko if results are good I have no doubt it will run hard and fast.It is very thinly traded and also tightly held.Iron ore stocks are definitely still in favour,China is taking strategic stakes in selected companies(not DMM)and we still have the Rio/BHP price hike to come.Ann couldnt have come at a much better time IMO.I would be a happy man with a price of $2.99!

grace · 6 May 2008

Looking at the figures being thrown around here, recent sale of DSO in the Pilbara (lower sovereign risk) at $4 tonne.

Is the railway line heavy guage to be able to transport the ore? What is it currently used for? Does it have spare capacity? Who owns the railway line?

Just vital questions in the link to placing a realistic value on this.....

alankew · 6 May 2008

Grace I dont think the railway is quite up to the job but its a start.Think I read somewhere that the problem is with a bridge not being able to take the weight but as i say its a start.By the way,any way of knowing when it will be out of TH,apart from the ann saying Wed

YOUNG_TRADER · 6 May 2008

Grace I'm not sure what your refering to

The current Spot Price of Iron Ore is close to $200 US/t

The current contract price (not accepted by Chinese) but with Vale is $132 us/t

Back when Iron Ore contracts where around $80 US/t most if not all Aussie brokers used an EV or Enterprise Value of $10/t for JORC Haematite resources

So I'm guessing with such an increase that brokers will no doubbt rachet up there EV $/t but I'm happy using $10/t for DSO JORC Resources

Regarding the raily its not in use and hasn't been in use for some time

It's 3Mt'sp.a. and will need some maintainance and upgrade work no doubt, but the company inspected it and reported it appeared to be in a good useable condition

However the one thing that was destroyed was the actual rail wagons

My point is with an intial small high grade DSO resource, an exisitng 3mtp.a. rail line which runs straight to the port, DMM could possibly set up very quickly and cheaply (ie $10m CAP EX) a 1mt p.a. DSO operation

For arguments sake such an operation would have an Op Ex of say $50/t vs spot price $200/t = margins $150/t = $60m p.a. in Profit

With its current undiluted mkt cap at $21m or diluted at $36m I think you can see the upside to which I point as such an operation would place the company on a PER of 0.5

But theres alot more work needed to get there, right now though the mkt cap is ridiculously cheap

grace · 6 May 2008

grace said:
Looking at the figures being thrown around here, recent sale of DSO in the Pilbara (lower sovereign risk) at $4 tonne.

Is the railway line heavy guage to be able to transport the ore? What is it currently used for? Does it have spare capacity? Who owns the railway line?

Just vital questions in the link to placing a realistic value on this.....

Sorry to mislead.....$3.74 per tonne (jorc compliant) was for a recent sale of GIR's share in RHI's DSO in the Pilbara to AMCI.

I don't think that any of my holdings in the Pilbara have a mc as high as $10/tonne DSO....wish they did though!

Would be very interested to know more about the health of the rail line!

YOUNG_TRADER · 6 May 2008

Ok I see what your saying Grace,

Alot of companies trade below the $10/t EV however as they approach production they trade much higher than $10/t as the actual profits they net on the production is now around $100/t+

So here 2 things to consdier

1. DMM is in Africa which isn't as "safe" as say our backyard Pilbara so perhap's a discount should be applied to the EV, though I can't see that being the case with SDL

2. DMM's intial JORC will only be a fraction of the project, remember the historical resource here is 750Mt's-800Mt's@56% Fe you just can't ignore this

So surely if the EV is to be discounted because its in Africa, some EV value must be given to the larget deposit size? say $1/t becuase it not yet jorc?

WELL $1/t EV = $420m - $450m which at 80% net interest and 60m shares fully diluted = $7 - $7.50 DMM

No matter how much you want to discount it given the sheer size of the historic deposit DMM should command a mkt cap of minimum $100m = $1.67

grace · 6 May 2008

Here is what I found on the rail line. Iron ore a bit heavier than timber I suspect.

RAIL
The Comilog railroad was built for heavy haulage for the logging industry of Congo (Brazzaville). Currently in use and runs through the Mayoko licence area from the western side to the north eastern corner of the licence. The rail connects to the city of Pointe Noire on the Congo (Brazzaville) south west coast. Direct discussions between DMC and the Minister of Mining indicate the rail is accessible by DMC subject to normal commercial terms.

If market cap goes up too much, a bit of dilution coming.....

ACQUISITION COSTS

DMC has agreed to the following consideration to consultants in relation to the acquisition of the Mayoko Iron Ore Project.
On completion on DMC’s agreed review period, DMC will pay AUD$500,000 plus issue
3,333,333 DMC shares and 11,000,000 DMC $0.20 options expiring 30th June 2009.
DMC will pay/issue further consideration as follows:
Upon DMC attaining a market capitalisation of AUD$25,000,000 DMC will issue 4,250,000 DMC Shares.
Upon DMC attaining a Market Capitalisation of AUD$50,000,000 DMC will issue 4,250,000 DMC shares.
Upon DMC making an announcement to the ASX of the discovery of a
400,000,000 tonne JORC inferred resource, DMC will issue 3,333,333 DMC
shares.
Upon execution of the Mining Convention DMC will issue 2,000,000 DMC
Shares.
The Mining Convention is understood to include the Mining Licence, Commercial Agreements with the Government and approved Environment Impact Assessment Studies.

smurfette · 6 May 2008

YT,

How was say AGO compared to DMM when it was at this stage?

Did it get recognition or was it the same as maybe that gives us insight into when DMM will get recognized?

Also what do you expect in terms of price???

Thanks,

Smurfette

YOUNG_TRADER · 6 May 2008

Hey Grace,

Yes dilution to come as well as a mention of funding requirments etc

But bottom line no matter which way you slcie the GCR story I reckon at 60c/70c its wayyy undervalued, sure at $1.50 it may not be way undervalued but then we've got a long way to go to get there,

I'll try and put some proper research

YOUNG_TRADER said:
Alan I thought that too but then after I saw the re-assayed drill holes I changed my mind,

Like ACS and YML I knew it was only a matter of time for them to get a JORC, DMM in a lot of ways reminds me of YML (now BRM)

tiny unloved company trading at a huge discount to what it should be

The JORC should make peopel take the company more seriously, I've done some rough calcualtions and I'm expecting 20Mts-40Mt's@57%Fe @ $10/t Fe EV = $114m - $228m

= NET 80% DMM $91m - $182m

Using 60M shares fully diluted = $1.50 - $3 DMM share price

Like I said YML/BRM all over again

p.s. See the re-assayed drill holes

Note the reason I'm expecting the intial JORC to be so small is because only a very small part of the entire project was drilled on a closed space drilling grid which is required for the JORC, the rest of the drilling was wide spaced exploratory type drilling

YOUNG_TRADER said:
My point is with an intial small high grade DSO resource, an exisitng 3mtp.a. rail line which runs straight to the port, DMM could possibly set up very quickly and cheaply (ie $10m CAP EX) a 1mt p.a. DSO operation

For arguments sake such an operation would have an Op Ex of say $50/t vs spot price $200/t = margins $150/t = $60m p.a. in Profit

With its current undiluted mkt cap at $21m or diluted at $36m I think you can see the upside to which I point as such an operation would place the company on a PER of 0.5

YOUNG_TRADER said:
Ok I see what your saying Grace,

Alot of companies trade below the $10/t EV however as they approach production they trade much higher than $10/t as the actual profits they net on the production is now around $100/t+

So here 2 things to consdier

1. DMM is in Africa which isn't as "safe" as say our backyard Pilbara so perhap's a discount should be applied to the EV, though I can't see that being the case with SDL

2. DMM's intial JORC will only be a fraction of the project, remember the historical resource here is 750Mt's-800Mt's@56% Fe you just can't ignore this

So surely if the EV is to be discounted because its in Africa, some EV value must be given to the larget deposit size? say $1/t becuase it not yet jorc?

WELL $1/t EV = $420m - $450m which at 80% net interest and 60m shares fully diluted = $7 - $7.50 DMM

No matter how much you want to discount it given the sheer size of the historic deposit DMM should command a mkt cap of minimum $100m = $1.67

YOUNG_TRADER · 6 May 2008

Smurfette to be honest I never really followed AGo early days so I wouldn't be able to tell you

Also there are many differences between DMM and AGO mainly being one is in Pilbara and the other Africa

Also DMM is working a historical project which would have been uneconomic at low Fe prices of say $30/t Fe but given current spot prices of $200/t and even contract prices of $150/t such a deposit would be more than economic

Having thought about it for awhile I realised the most obvious comparison can be made with SDL, SDL is also working a historic deposit so lets compare the Mkt Caps and EV's and see how DMM stacks up

SDL

Mkt Structure
Shares
2,000 Billion shares + options

Cash $60m

Mkt Cap @25c= $500m diluted

Projects
Mbalam Iron Ore, 100%, Camreoon

1,100 Mt - 1,200 Mt @ 39% Fe Historical Resource
100 Mt - 140 Mt @ 60% Fe Historical Resource

The project is in Cameroon which borders Congo the funny thing is not only are these 2 companies very comparable but they are also very close to each other

@ a mkt cap of $500m the company is trading on an EV of $3/t per prospective tonne Haematite and around 50c per prospcective tonne of Magnetite (ie $250m for the Haematite and $230 for the Mag)

CAP EX = $3.3Billion

Well funded, well backed and supported by Insto's, excellent management

DMM

Mkt Structure
Shares
36m
24m 20c 30/6/09 options

Cash $1m + $5m from options = $7m

Mkt Cap @60c= $21.5m undiluted or $36m diluted

Projects
Mayoko Iron Ore, 80%, CONGO in Africa NOT DRC

Historical Resource 750Mt's - 800Mt's@56% Fe

using SDL's $3/t per Haematite = @$3/t EV $1.2 - $1.35 Billion

JORC due out and reason for trading halt expecting 20Mt's - 40Mt's@56%Fe as only a very small part of the area has be re-assayed for JORC purposes, its a starting point nevertheless

Conclusions

SDL Mkt Cap $500m Historic Resource 1,150Mt @39% Fe +120Mt@ 60% Fe

DMM Mkt Cap $36m Historic Resource 775Mt@56% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

All in all DMM does look awfuly cheap when compared to SDL

smurfette · 6 May 2008

SDL Mkt Cap $500m Historic Resource 1,150Mt @39% Fe +120Mt@ 60% Fe

DMM Mkt Cap $36m Historic Resource 775Mt@56% Fe

$500mn against $36mn where the $36mn resource has a far larger hemitite component

I think you could say it compares favourably (to say the least) with SDL.

Are management between the two the major reason behind the 500mn vs 35mn difference.

Anyone know much about DMM's management?

Smurfette

YOUNG_TRADER · 6 May 2008

Smurfette it could be many things, why is BHP bigger in Mkt Cap than RIO etc etc?

But I think with DMM its one thing really EXPOSURE

No one knows about DMM and this maybe due to the fact that the company isn't really promoted,

Compared with SDL which have George Jones and Ken Talbot on board, 2 of the industry's most watched and followed players

So yes in asense it is to do with management, not so much their quality but rather the fact that George Jones and Ken Talbot have a massive following and this in itself creates awareness and exposure for the stock

But the conclusions I came to speak for themselves, at some point or another the mkt will begin to appreciate this company's huge potential ala IRC GCR

Conclusions

SDL Mkt Cap $500m Historic Resource 1,150Mt @39% Fe +120Mt@ 60% Fe

DMM Mkt Cap $36m Historic Resource 775Mt@56% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

All in all DMM does look awfuly cheap when compared to SDL

YOUNG_TRADER · 7 May 2008

Well I woke up early today to see DMM's JORC and here it is

Came in at the midrange of my guess being JORC 33MT's@55.5%Fe

also the total target is 110Mt's-135Mt's@55%-58%Fe+ 750Mts- 800Mt's @35%-45% Fe

Conclusions

SDL Mkt Cap $500m Historic Resource 120Mt@ 60% Fe + 1,150Mt @39% Fe

DMM Mkt Cap $36m JORC 33Mt's@55.5%Fe + historic/target 125Mt's@57%Fe+ 770Mts@40% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

Given the very comparable JORC's DMM's mkt Cap should at least be 1/4 that of SDL's = $150m = $2.5 DMM

YOUNG_TRADER · 7 May 2008

Found an interesting article waiting for me in my email acc (thanks google alerts )

http://www.theaustralian.news.com.au/story/0,25197,23656954-5005200,00.html

Should draw some interest

DMC ready to make most of Mayoko

Font Size: Decrease Increase Print Page: Print Kevin Andrusiak | May 07, 2008

PERTH-BASED junior explorer DMC Mining is expected to add to the iron ore mania on the bourse today when it releases its maiden resource statement for its Mayoko project in Africa.

The company was in a trading halt yesterday pending the announcement, which is expected to show an initial resource of 33 million tonnes of hematite ore grading upwards of 55 per cent.

DMC is believed to be eyeing a resource of up to 135 million tonnes at the Mayoko project, in the Republic of the Congo's Pre-Cambrian Congo Craton.

The explorer has managed to build an initial inferred resource based on only limited drilling at Mayoko and will press on with an estimated 30,000m drill campaign from next month. In its favour is the fact that the deposit is only a few kilometres from rail facilities and the deposit is open at depth and along strike.

DMC is also looking to prove up a magnetite resource for the project with the magnetite mineralisation hidden by the hematite ore. The Republic of the Congo, often confused with the Democratic Republic of Congo, is considered to be one of the lower risk nations in Africa in terms of security and politics.

YOUNG_TRADER · 7 May 2008

Guys I don't mean to keep harping on here, but this stock is now ridiculously undervalued, its trading at 1/10th of SDL's MKT CAP despite having a comparable resource

I don't think SDL even has a JORC yet

Guess I'll just have to sit and wait for a re-rating shouldn't take to long and it will come

Conclusions

SDL Mkt Cap $500m Historic Resource 120Mt@ 60% Fe + 1,150Mt @39% Fe

DMM Mkt Cap $48m JORC 33Mt's@55.5%Fe + historic/target 125Mt's@57%Fe+ 770Mts@40% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

Given the very comparable JORC's DMM's mkt Cap should at least be 1/4 that of SDL's = $150m = $2.5 DMM

Sean K · 7 May 2008

YOUNG_TRADER said:
Guys I don't mean to keep harping on here, but this stock is now ridiculously undervalued, its trading at 1/10th of SDL's MKT CAP despite having a comparable resource

I don't think SDL even has a JORC yet

Guess I'll just have to sit and wait for a re-rating shouldn't take to long and it will come

Conclusions

SDL Mkt Cap $500m Historic Resource 120Mt@ 60% Fe + 1,150Mt @39% Fe

DMM Mkt Cap $48m JORC 33Mt's@55.5%Fe + historic/target 125Mt's@57%Fe+ 770Mts@40% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

Given the very comparable JORC's DMM's mkt Cap should at least be 1/4 that of SDL's = $150m = $2.5 DMM

Looks good LN. Bit of profit taking by the look. I ´m holding due to the potential fundies. Plus, I can`t trade at the moment anyway. Internet here is crappo!!! It's buro speed!!

YOUNG_TRADER · 7 May 2008

Yeah Kenna I'm with you I bought more today at 80c ish and 70c ish

Its trading on a value 1/10th that of SDL's yet the deposits are comparable

Re-rating will come, matter of when not if just like IRC ACS GCR

Sit back and wait for it I say

YOUNG_TRADER · 8 May 2008

This has to be the most undervalued Fe play I've seen for a long time,

Its trading at less than 1/12th of SDL its most comparable cousins mkt cap

I mean come on?

I'm putting my money where my mouth is I picked up another 50k at 60c (bought more at 70c and 80c yesterday too)

I firmly believe that DMM should trade at around 1/4th - 1/3rd SDL's mkt cap

So either SDL drops to like 5c or DMM rises to $2

I know which one I think is more likely

YOUNG_TRADER said:
Guys I don't mean to keep harping on here, but this stock is now ridiculously undervalued, its trading at 1/10th of SDL's MKT CAP despite having a comparable resource

I don't think SDL even has a JORC yet

Guess I'll just have to sit and wait for a re-rating shouldn't take to long and it will come

Conclusions

SDL Mkt Cap $450m Historic Resource 120Mt@ 60% Fe + 1,150Mt @39% Fe

DMM Mkt Cap $36m JORC 33Mt's@55.5%Fe + historic/target 125Mt's@57%Fe+ 770Mts@40% Fe

- Same parts of Africa = similar country risk
- DMM has existing infrastructure which may be an advantage and reduce Cap Ex considerably ie RAIL and Port savings
- SDL has some excellent people behind it and managing it

Given the very comparable JORC's DMM's mkt Cap should at least be 1/4 that of SDL's = $125m = $2 DMM

DMM - DMC Mining

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