Some fundamentals of INL for anyone getting concerned.... Below from the April 5th 2006 announcement.
The 10.9 million tonnes Hellyer tailings dam resource contains (along with lead, silver, gold and copper) 305,000 tonnes of zinc at an average grade of 2.8%, which alone at today’s US$/A$ exchange rate and LME zinc price has an in-situ metal value of over A$1.1 billion.
The 10.9 million tonnes Hellyer tailings dam resource contains (along with lead, silver, gold and copper) 305,000 tonnes of zinc at an average grade of 2.8%, which alone at today’s US$/A$ exchange rate and LME zinc price has an in-situ metal value of over A$1.1 billion.
and that doesn't take into consideration the lead and silver...
Intec's current market cap is about 112 Million... Note that 1/2 of all profit made for the 1st 2 years goes to Polymetals, and half of the ongoing production costs are borne by Intec.... This also from the same announcement...
The CLA provides for an unincorporated joint venture (JV) owned equally by IHM and PMS. PMS will operate the Project and sole-fund the ‘Start Up Costs’ in an amount of A$4 million or such larger amount as is required in order to achieve ‘Steady State’, being an annualised tailings throughput of 1.5 million tonnes and producing concentrate grading >35% zinc. After Steady State has been achieved for a continuous 21 day period, the JV will commence to bear the Project operating costs for a period of two years, with an option to renew the Project yearly for a further two years. Four years after commencement of Steady State, IHM will have the right to acquire PMS’s 50% interest in the JV for A$1.
The JV is projected initially to produce about 63,000 tonnes of concentrate per annum, though it is intended over time to significantly increase this amount by expanding the tailings throughput capacity of the Mill to above 2 mtpa. INL has commenced technical investigation of the opportunity to blend EAF dust (grading ~30% zinc) into the concentrate product.
It is important to note that:
1) all Hellyer assets, the refurbishments of which will be depreciable capital improvements, remain the property of IHM at all times;
2) the refurbished Mill will be made available as much as practically possible to treat ores from regional miners (notably including Bass Metals Ltd (ASX code: BSM) which is 22.1% owned by INL);
3) the retreatment residues from the Mill will be returned to the tailings dam where, though depleted of two thirds of their contained zinc value (and of 17% and 10% of their lead and silver values respectively), they will be available for treatment yet again via Intec’s Hellyer Metals Project technology, after being augmented with high grade zinc secondary residues such as EAF dust, lead smelter slags and primary leach residues; and
4) the effect of (3) above is that the JV’s Project (under PMS’s operational management) will in no way cut across the overall Intec Hellyer Metals Project, whose Burnie Demonstration Plant is now achieving its required technical outcomes and will very shortly be the subject of a separate ASX announcement.
There is some important info in that snippet! not the least of which is that after 4 years Intec will be getting 100% of the revenue from the project! I suggest anyone holding INL who hasn't read that announcement should do so, as well as a few of the earlier ones... I gave a list before I think of some of the important ones.
I have also done some
rough calculations based on the figures in INL's latest report... and I came up with a revenue figure of about $40 million US. After conversion to aussie $ using an exchange rate of 0.77 we have approx 52 million gross revenue.
This is based on the projected 65,000 tpa of concentrate and the reported percentages of zn pb and ag.
using prices slightly below current spot prices and dividing the figure by 2 (because of the JV) and then taking 90% of the metal value (which is what they are getting for it) I came up with
zn 33 million
pb 4.3 million
ag 3.1 million
Note prices used were:
zn $3000/tonne
pb $1700/tonne
ag $13.40/oz
I may have made a mistake here!! note I do not know what the production costs actually are, but the projected costs in April last year were AUS $50 million per annum, $25 million of which go to INL... so that would leave $27 million in profit... with 557 million shares on issue that comes out to about 4.8c eps (note that I have not factored tax in as accumulated losses at June 2006 were 39 million). This also doesn’t take into account depreciation an amortization, I have assumed they are in the $50,000,000 annual costs quoted in the April report (not necessarily a correct assumption).
So based on slightly lower than current metals prices, a p/e of 10 and some assumptions that they will meet production targets, it would seem the sp should be around the 48c mark based just on the JV... of course this is an overly simplistic valuation, and I could have stuffed up, but it does tend to support my feeling then INL have been oversold
Of course I could well have made some major mistakes here so don’t rely on my figures alone… however if these figures are even remotely close, zinc prices could go down substantially and Intec would still be in a profit situation. Their original April 2006 profit forecast was based on a zinc price of about US $1980/tonne. Based on that price their eps would have been approx 1.7c (or 17c share value with p/e of 10!) so unless we see a massive drop in the price of zinc I think that INL if it does drop Monday will just be even more of a bargain than it already is
Tony.