SDL - Sundance Resources

[Peakey]

Wow, what a cracker of a day for SDL.....!!

Surely with this amount of action there must be some sort of News in the pipeline?

Dare I say, the stock must be starting to look a little overbought?

We'll see what tomorrow brings.

Good luck to those that are on this one.

Cheers
Peakey

 

[Strangways]

I see that the undiluluted market capitalisation at the close on 13 June was $646m. That number needs to put into some real context against the industry and my view is that mining companies need to be examined by virtue of the Enterprise Value, particularly in relation to the size of the resource base.

You need to use some estimation here because the resource base is not yet JORC compliant, however all the valuations are being done on the 218mt @ 60% Fe. The resource base is unlikey to be that small as early estimates have the size at 800mt to 1000mt, ie 4 to 5 times larger - but to be proven up. The exploration potential recently changed also with a new announcement. I am unaware of any details about this new area.

A research report I saw (released 11 May) had SDL trading at an Enterprise Value of $1.17/tonne using the 218mt figure (and this must currently be used) when the stock price was 16.5 cents and the view put was that the market capitalisation would need to double to bridge the gap to the average of 3.15/tonne for similar explorers (not producers).

If the resource base is 4-5 times larger, then this indicated discrepency between SDL and the industry will be much larger, so a much higher market capitalisation can be seen to be well understood by this peer analysis. On that peer analysis, the stock may trade between $1.32 and $1.65 to be in line with other similar companies which have JORC compliant resources.

That is just one analysis and is based on non-JORC information. I am interested to see what other people consider by applying sound analysis techniques.

 

[Peakey]

3 day (5 minute interval) chart for SDL.

Support is at around .41 (followed by .39 then .365) and resistance is at .45 then .50. Trading above .50 would signal the next bullish run (you'll see the SUN Dancing in the Blue skys above .50 ).

10 and 20 period moving averages shown on chart as well.

I'd be quite happy to see SDL trade between .39 and .45 and consolidate for a while , just to cool its heels a little.

If anyone has any other thoughts on the chart, then by all means throw your in.

Strangways, thanks for the analysis above.

Cheers
Peakey

 

[the barry]

The talbot group has taken out another 2 percent in this company bringing their holding to 12.5 percent. Announced this morning they got an extra two drills instead of one. Is going to be a very interesting ride until the completion of the drilling at the end of the year. Hopefully see another strong open tomorrow on the news.

 

[MR.]

“Strangways”
I have read that Carmichael report (released 11 May) a number of times over the past month.
http://www.sundanceresources.com.au/documents/news/00202_SDL_11052007.pdf
They had SDL trading at an Enterprise Value of $1.17/tonne (on page 7) against the sector average of $3.15. Now the (largest of explorers) FMG has been estimated on that page at $3.00. I would think if SDL was valued near the same as FMG something is not quite right here. FMG is a number of years further down the track then SDL. If SDL proved up 1 billion tonnes of Hematite I believe its Enterprise Value should be about half that of FMG making the share price a bit over $1-.
Its very interesting how different people value a company before it actually produces something. I have calculated the share price of the company once it is in production. I have put a target price of $6- per share with production being 35 million tonnes per year. This price is more than 10 times the current price of $0.47. I don’t see the current share price overvalued if you take into account the resource is expected to be a lot more than 218 million tonnes of Hematite. Also if 1 billion tonnes is found SDL may increase the production from 35MT to 50 MT per year over a 20 year mine life. Remember SDL is looking for 700 million tonnes for the 20 year mine life at 35MT per year..

Calculations:
Selling price of $75- AUD Tonne.
FOB cost of extraction and processing = $30- AUD Tonne.
Profit per tonne of $45- x 35 million tonnes per year = $1575 million AUD yr.
Minus $123 million (loan over 20 years) = $1452 million
The mine is 90% owned by SDL = $1306 million per year.
Divided by 1780 million shares = $0.73 per share per year.
If a P/E of 8 was used considering both (RIO and BHP trade at 10)
The target price I have put on SDL is $6.00 per share.
I own SDL because of this calculation I have made.
Please do your own research.
I wonder what the Talbot Group has calculated?

Happy to be holding.

 

[ta2693]

“Strangways”
I have read that Carmichael report (released 11 May) a number of times over the past month.
http://www.sundanceresources.com.au/documents/news/00202_SDL_11052007.pdf
They had SDL trading at an Enterprise Value of $1.17/tonne (on page 7) against the sector average of $3.15. Now the (largest of explorers) FMG has been estimated on that page at $3.00. I would think if SDL was valued near the same as FMG something is not quite right here. FMG is a number of years further down the track then SDL. If SDL proved up 1 billion tonnes of Hematite I believe its Enterprise Value should be about half that of FMG making the share price a bit over $1-.
Its very interesting how different people value a company before it actually produces something. I have calculated the share price of the company once it is in production. I have put a target price of $6- per share with production being 35 million tonnes per year. This price is more than 10 times the current price of $0.47. I don’t see the current share price overvalued if you take into account the resource is expected to be a lot more than 218 million tonnes of Hematite. Also if 1 billion tonnes is found SDL may increase the production from 35MT to 50 MT per year over a 20 year mine life. Remember SDL is looking for 700 million tonnes for the 20 year mine life at 35MT per year..

Calculations:
Selling price of $75- AUD Tonne.
FOB cost of extraction and processing = $30- AUD Tonne.
Profit per tonne of $45- x 35 million tonnes per year = $1575 million AUD yr.
Minus $123 million (loan over 20 years) = $1452 million
The mine is 90% owned by SDL = $1306 million per year.
Divided by 1780 million shares = $0.73 per share per year.
If a P/E of 8 was used considering both (RIO and BHP trade at 10)
The target price I have put on SDL is $6.00 per share.
I own SDL because of this calculation I have made.
Please do your own research.
I wonder what the Talbot Group has calculated?

Happy to be holding.

Hi Mr. I have read some of your post on CFE which is brilliant. but for this one SDL, I have say give PE multiple 8 is too far.
compared with BHP and RIO,it has a long way to go to produce for SDL, and
Cameroon is a very corrupted country, the hidden cost of bribing may be very high. The railway is still on paper which may incur objection from local people. because it is poor and corrupt, Cameroon is not as stable as Australia.
So, I will give multiple 1 (which is same the market gave to YML) which is $0.73 in dollar value seems to be fair.

 

[MR.]

Thanks ta2693.
I will give your opinion some thought. Perhaps 8 is too high. Carmichael gave this some consideration at about 1/3 of the Enterprise Value. ie: 1.17 x double = $2.33 with the (sector average of $3.15)
Perhaps a P/E of 5 or 6 should be used! I don't think a P/E of 1 will be priced in by the market. Thanks for throwing this in from left field.

 

[MR.]

Hi Mr. I have read some of your post on CFE which is brilliant. but for this one SDL, I have say give PE multiple 8 is too far.
compared with BHP and RIO,it has a long way to go to produce for SDL, and
Cameroon is a very corrupted country, the hidden cost of bribing may be very high. The railway is still on paper which may incur objection from local people. because it is poor and corrupt, Cameroon is not as stable as Australia.
So, I will give multiple 1 (which is same the market gave to YML) which is $0.73 in dollar value seems to be fair.

Ta2693, "now your've got me posting in a row." I think you may have misunderstood my post. I was not indicating that the share is currently worth $6-. This would explain why you put a P/E value of 1 on the company.

However perhaps a P/E of 8 is a little high for when this company is in production. If I use a P/E of 6 it looks real cheap compared to BHP or RIO getting towards half. ie: P/E 6 vs P/E 10. Also both RIO & BHP have mines in other countries, how have people factored in risks there? I’ll include a P/E of 6 into my calculation to cover this unknown country which SDL is entering.

# The FOB cost price below is high at $30- considering SDL estimated $18- per tonne. I raised this cost after investigating FMG’s costs. SDL’s figure of $18- could be correct but I have used closer to FMG’s costs. SDL’s labour will be cheaper!
# The P/E of 6 doesn’t look real fair compared to (BHP’s and RIO’s 10.) But will use to get an idea of where SDL can go.
# Also I suspect 50 million tonnes will be mined per year if 1BT of Hematite is mineable.

Calculations:
Selling price of $75- AUD Tonne.
FOB cost of extraction and processing = $30- AUD Tonne.
Profit per tonne of $45- x 35 million tonnes per year = $1575 million AUD yr.
Minus $123 million (loan over 20 years) = $1452 million
The mine is 90% owned by SDL = $1306 million per year.
Divided by 1780 million shares = $0.73 per share per year.
If a P/E of 6 was used considering both (RIO and BHP trade at 10)
The target price I have now concluded for SDL is $4.40 per share at 35 million tonnes per year.

At the current share price of $0.465 this target price of $4.40 is 9.4 times the current price. Basically still 10 times. This target price is for when the mine is operational.

 

[springhill]

Nice to see that SDL finished the week in a strong manner up from its low of around 39 cents to a nicely timed high of 46.5 cents in a week that was less than stellar. Possibly pointing to a nice run on Monday with strong demand. Though it probably hasnt had enough of a breather from its last run, it seems to have consolidated quickly. 50 cents maybe a sustainable target. Any thoughts/opinions?

 

[Peakey]

Chart update:

Looks like we've broken a short downward trend. Price moved 12.05% for the day on the last day of the financial year, however it was on LOWish volume (14mil compared to some of the big volume days of 50mil plus over the last few weeks). Volume over the last 2 weeks has also been in a downward trend.

Next hurdle will be .48. Then the bigger hurdle of .50/.51. Support is @ .39/.40.

We need to see a close above .50/.51 on BIG volume to confirm the next upleg.

Also some points to note:

.465 is the highest weekly close, but it has been on pretty light volume (compared to previous weeks), could indicate that the supply side is running out and buyers will need to pay up to fill the orders.

15/6/07 - .42 (weekly volume 299mil)
22/6/07 - .45 (weekly volume 162mil)
29/6/07 - .465 (weekly volume 60mil)

Those people that bought in at higher prices (between .465-51), would've have needed to close their positions this week to realise their capital loss for 2007. The supply/sellers could be starting to thin out, opening the door for potentially higher prices in the short term.

On the flip side, those that bought in during April/May and are sitting on some pretty sweet % returns D) in a short space of time and maybe waiting for the new financial year to begin to do their selling to avoid paying CGT for the next 12 months. However these punters are also probably more inclined to 'let their profits run'..... especially with the first of the assay/drilling results just around the corner and the potential for even bigger returns.

I guess the key for this stock will be the volume, when we see the BIG volume return this will dictate which way the stock will go.

That's about it for the moment.

Cheers
Peakey

 

[springhill]

Im still pretty new at share trading and this may seem like a silly question, but does anyone have a problem with the fact that SDL has 1.6 billion fully paid shares available? Surely the price cant sutain momentum with that many potentially on the market? Is consolidation a worry?

 

[gfresh]

There looks like a massive buy at the end of yesterday's trade?? volume was on current average of about 14.63m, sat fairly static at low 40c mark throughout the day, and then at the end closed on 12% up. Something is afoot next week?


1.6bn shares on issue does seem a lot for a company that has not actually achieved anything so far.. My calcs could be wrong, but they'll have to return about $800m in revenue a year once operations were successful in 3(?) years to sustain a SP of say $6 with a P/E of say 12

 

[NewBloke]

On Friday the volume was 14m, during the last 30 minutes of trade on Friday the volume was 5m This looks positive, I hope there is encouraging news ahead.

 

[jonojpsg]

My first post - hmm, well Sundance do have 1.6bn shares on issue, which values them at around 800m at the moment. This is for a company with resources similar to Fortescue a couple of years ago though, and given Fortescue's run to 9bn value I would say that Sundance are pretty reasonably priced.

Also if you read the Open Briefing from a month or so ago, CEO said they were looking at potentially 900m US a year income which certainly would sustain a decent share price hike between now and then!

 

[golfmos123]

More big volumes going through first thing this morning and the price is still climbing a little. Possible bull run through 50 now. Anyone else with an itchy trigger finger? If volumes stay up might be hard to stay out of this one??

 

[1stunnedmullet]

may be a short-term reversal here

1. all time high made today during trading
2. close for the day below prior days close

 

[Peakey]

Having watched Friday and Monday's trading sessions and seen the volume gradually pick up and seeing those 2 white candles, I felt pretty confident heading into today that we were going to see some positive movement in the share price of SDL......... and we did in the morning, the stock was going along as I'd felt it would, good volume, the price was trending up nicely, nothing too outrageous, made fresh highs @ .53, thought to myself this a dead set certainty of closing above .50 .......... (see the chart below of the past week, purple trend line on the 1 week chart shows the price action)

Then, what the!!!! Where did those bears come from

The close was less then impressive, closed on the absolute low of the day on sizeable volume (42mil today).......... and before you know it, where back at Friday's closing price of .465.........

Not sure where it'll go from here, however where currently looking at a nasty black candle for today's trading on big volume, which leads me to think (and I hope I'm wrong here), that tomorrow could also be another negative day........

.465 may turn out to be a support level (see chart). The rest of the week is gonna be very interesting though......

Cheers
Peakey

 

[golfmos123]

Thanks Peakey,

I tend to agree with your analysis, although I wasn't too surprised by the bounce in SP this morning. Settling down again afterwards which isn't all bad news either, nice resistance level being set in the high 40's at least. And might have allayed your fears of that big black candle??

Rest of the week will prove interesting to see if it breaks through either on high side or low side

Am still happy to think that a high side break through would signal buy it up!

 

[Peakey]

Yep Golf,

Encouraging day today (considering yesterday's close). Bit of consolidating I guess, with a nice little white candle. (yes, we survived yesterday's black candle )

Support @ .465 held firm (for now). Not BIG volume, 17.7mil (10day average volume is 19.7mil).

I concur, if we create new highs and close strongly, then we should go higher, but we'll cross that bridge if/when we get to it.

Cheers
Peakey

 

[Peakey]

Well we closed above .50 today on above average volume (24mil) and finished the day just off the high of .53, @.525 with a nice looking white candle. Question now is, can we surpass .53 and close above it or do we drift lower back down to .465/47?????

Interesting day for SDL tomorrow.....