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MMX - Murchison Metals

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As a shareholder of mmx who bought in at 65c I still think there is plenty of upside. After the announcement of the joint venture with Mitsubishi for the port and rail infastructure, it seems to be a race between Midwest corporation(MIS)/Yilgarn infrastucture and MMX/Mistubishi bill for the rights to bulid the whole thing. I think the Mid West Alliance has done it's dash!!!!!!!
 
Hey boys & girls what u think of this - maybe an overstated guess or an understated announcement - you tell me but lets start some more rumours.

On the ASX announcement Iron Ore Infrastructure Agreement with Mitsubishi - 6 pgs

1st page under highlights, 2nd point - Murchison & mitsubishi to jointly pursue other iron ore development opportunities in the mid west region of WA.

Could this be a takeover of MIS - This would make a lot of sense.

The major block to getting the infrastructure contract is our opponent MIS with Yilgarn. See page 4 Midwest has continuing rights under state agreement known as Iron Ore (murchison) agreement. The state agreement doesnot however confer on midwest the exclusive right to develop the regions infrastructure.

The easiest way to clear the path would be to take them over so they save us a battle. This makes sence in both legal & business sence - they good assets to.
 
I'm onboard. Market cap of 1.6 billion and the potential total investment is approximately A$3 billion. That gave me a buy signal straight away. Lets see how they go now. Im in at 4.98
 
Strong close. Finished at 5.23 I dont know if some holders know how big this deal really is. I wouldn't of been selling today. Taken from the announcement.

Highlights:
  • Mitsubishi to acquire 50% of Murchison’s iron ore assets
  • Murchison and Mitsubishi to jointly pursue other iron ore development opportunities in the Mid West region of Western Australia
  • Murchison and Mitsubishi to establish 50:50 infrastructure business to develop new Mid West rail and port infrastructure
  • Mitsubishi purchase price expected to provide required equity capital to develop Jack Hills mine and associated rail and port infrastructure
  • Mitsubishi to manage the arranging of debt funding and provide additional financial support for Jack Hills and for Murchison’s commitments to new infrastructure business on approval to proceed with the expansion of Jack Hills
  • Potential total investment of approximately A$3 billion
 
So, if they invest 3Bn.. they are investing twice the market cap?

They must really know the iron ore assets are worth it..
 
thierry said:
So, if they invest 3Bn.. they are investing twice the market cap?

They must really know the iron ore assets are worth it..
Click to expand...

Yeah..they have faith in the assets there.

I feel the open is going to be extremely strong when looking at the buyer depth and weak seller depth. Looks like I made the right decision jumping in yesterday when a few investors were selling out under $5. I feel a lot of investors have no idea to the potential value of the deal.
 
I don't hold MMX, just been watching it from the sidelines over the last couple of months............. I gotta say a VERY BIG Well Done to all MMX holders!!!!!

Cheers
Peakey
 
The open was promising but it has fallen back a bit now. No shortage of buyers above 5.10 though. I'll hold this one for awhile. I think it has further to run with that deal being approximately worth 3 billion. There will be no worries in regards to funding for MMX.
 
Good performance today.. peaking at 5.45..

I don't think there have been many speculators.. so there was not much profit taking today...but lets see tomorrow.
 
From from a poster on Hot copper. Thought this was some good information

Comments from Merrill Lynch research note dated 19June.

Mitsubishi anchors the JV - Buy to $6/sh

Mitsubishi has entered into an agreement to buy 50% of Murchison's Jack Hills iron ore mine, and 50% of the necessary related infrastructure. In doing so, Mitsubishi add credibility to the project, largely remove the financing risk, and create a mark to market project pricing event inside the next 12mths against which MMX equity valuation can be assessed.


Timing on the buy in: by mid 2008.

Mitsubishi will purchase its 50% share by paying MMX $100m on final signing (around Oct 07), and $50m into the JV company, and a deferred payment equal to an agreed valuation less half the $150m initial payment. The deferred payment is based on an ungeared financial model, with already agreed discount rate, commodity and currency assumptions and tax structure, with only final costings to come.


Value of buy in: $6.76/sh before tax. New NPV $4.74/sh

While we have no guide to the discount rate, the positive tone of management presentations implies that the deferred payment valuation will be positive news, even at current price levels. Using an estimate of Mitsubishi's WACC, we calculate a buy in value of $6.76/sh but this is not at MMX's market WACC and does not include capital gains tax.


Risks: Reserves and costs

We have yet to see a JORC compliant resource statement for the 380mt, and we have not seen the final feasibility capex and opex, and hopefully retain conservative estimates. Mitsupishi are paying $150m in advance of the resource number, and would have done due diligence on more recent drilling.
 
Some really strong buying action happening with this one. Could very easily reach that 6 dollar price target given by Merrill Lynch.
 
Some really strong action in the last hour of trading today. Touched 5.89 and closed at 5.85.

Below is a rundown of their current market cap

Issued shares - 334 million
Listed options (20c) - 27.4 million
Unlisted options (20c) - 24.5 million
Unlisted options (50c) - 5.0 million
Unlisted options ($1) - 5.0 million

Total shares = 395.9 million shares

Fully diluted market cap currently at 5.85 is just under 2.32 billion

Latest deal with Mitsubishi is worth a total investment of approximately 3 billion. IMO market cap could easily surpass this level. This would bring the share price to around $8. I think this is very possible working purely off the value that the deal brings. Any comments? Am I reading this incorrectly?
 
I should post its a potential total investment. Potential. However..Mitsubishi will have to spend some big bucks if they do want to ramp up the production of the Jack Hills mine. Only some big bucks could do the development of the port and rail infrastucture..and Mitsubishi is a company who can afford to do this. Its obviously in their own interest for the future.
 

chris1983

Chris on a different angle, work out how many tonnes of ore they want to mine per year. Mutiply that by expected profit per ton.(less tax) Divide that figure by the amount of shares on issue, then multply that by a price earnings ratio of say 10 = a rough share price.

exampe: 25M ton x $15/ ton = $375M less 30% tax = $262m
$262M divided by 400M shares = .655 x PE of 10
= share price $6.55
Obviously as figures or the investment climate changes the end result will change. Cheers
 

Thats a fair valuation but thats just simply adds further value onto my valuation. All I have worked out is a valuation based on the magnitude of what the deal is worth. That alone..with the size of the investment..warrants an increase in SP. Add your figures into the mix..and um..this is huge.
 
Solid finish today.. so I think there is more upside.. also the volume was not extravagant, so i'm thinking it was more investors buying up today. any thoughts?

Yeah I think 6-7 seems to be a price it might (well hopefully) consolidate at..
it's got excellent deposits, good finance backing, good management, and a lot of potential still.

The merril lynch report valued it very conservatively at 12-month target $5, saying without conservativeness it could be $22.. but I doubt it will get that high in the near future.. I'd like to see some more broker reports (or excerts) posted here.

Cheers.
 

Definately more upside especially if we get a resource upgrade of the Jack Hills deposit which I will be expecting. This is good quality ore and there is bound to be a lot more of it. Just touched 6 dollars. That was the first target. Lets see if it can stay above this level..my opinion is I dont think it will stop running.
 
The only way I see possible that Murchison could fall off the rails is if Mitsubishi retracted their deal some how..or broke the agreement..and this isnt going to happen..or maybe some dispute arises over the rail being built? But they need a rail system up there so I dont see any problems..who knows though..Im sure there are other factors to look at when your going to be developing such a huge operation.
 
This one came up on my scan overnight, but alas, no spare money. Actually, just looking at my scan data, it came up last week at $5.23......

Damn public service wages!!! I hope you guys enjoy the ride
 
The West Australian Buy Recommendation

BUY

Merill Lynch sees plenty of upside in Murchison Metals (MMX) after its agreement with Mitsubishi over Murchison's Mid-West iron ore project.

The Japanese group has agreed to buy 50 per cent of the proposed Jack Hills mine and associated infrastructure for 150 million by September, followed by a second deferred payment once bankable feasibility studies into a 25 million-tonnes-a year mine, Oakajee port and 500km railway are complete in the first half of next year. Merrill Lynch put a valuation target of $9.80 a share on Murchison and a 12 month price target of $6.

The valuation could be even higher if iron ore prices are above expectations.

Murchison shares slid 13 cents to 5.72.

Okay guys I predicted this would hit the papers and further buy recommendations would come out over the weekend. See once again below how they get to their valuation.

Below is a rundown of their current market cap

Issued shares - 334 million
Listed options (20c) - 27.4 million
Unlisted options (20c) - 24.5 million
Unlisted options (50c) - 5.0 million
Unlisted options ($1) - 5.0 million

Total shares = 395.9 million shares

Fully diluted market cap currently at 5.85 is just under 2.32 billion

The latest deal with Mitsubishi is potentially worth a total investment of approximately 3 billion. IMO market cap could easily surpass this level. This would bring the share price to around $8. I think this is very possible working purely off the value that the deal brings. To have a company willing to invest that much money is a big deal.

Future upgrades to their deposits I think will definitely occur. No way would Mitsubishi dedicate 3 billion for the current size of the resource. They are investing in this for the future of their own company and are expecting the Jack Hill deposit to be increased and further resources to be discovered.

So I got a valuation of $8 purely based off the deal. Let’s work out how much money will come in. If you go to their September 2006 investor presentation which was made in Hong Kong they give us all the figures we need. On the 26th slide they post the Project Economics. I have attached this slide below. Now at 25mtpa they predict EBITDA of 700 Million. NPAT would be around 490 million. Now don’t forget they worked these projected economics off operating costs from the pre-feasibility and 2006 dollars. The Aussie dollar is now currently above 84 cents and Iron ore prices are predicted to rise. How good is this looking for Murchison. My Final Valuation comes to around 9 dollars a share when working off 2006 dollars which has risen considerable and off lower iron ore prices. Looks awesome. Don’t forget I haven’t even factored in the potential sizes of Weld range and Jack hills. This valuation is purely off earnings and the deal made with Mitsubishi.
 

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