SDV - SciDev Limited

[imajica]

solid close today of 20 c - up 11% and closing near day's high

with larger investors taking an increased stake and new fund managers coming on board - INL is positioned well for further gains

also the zinc spot price rising dramatically wouldn't have hurt either!!!

 

[juiceman]

solid close today of 20 c - up 11% and closing near day's high

with larger investors taking an increased stake and new fund managers coming on board - INL is positioned well for further gains

also the zinc spot price rising dramatically wouldn't have hurt either!!!

INL up 11% on volume.
BSM up 15% on low volume.
Additional new director joins the company: James Bell brings some legal clout to the board,with a reputation to boot.
Typical inl building a solid base before blowing their trumpit.

 

[wintermute]

Thats incorrect wintermute.

Read the intec process on their site, from electro winning it still does require smelting you cant form a zinc ingot from electrolysis.

The main advantage to the intec process is the elimination of the roasting stage thats where the power saving is.

The zinc concentrate that intec send out is going to go to a place where they electro winning it and then smelt it to.

They have probably done away with stage 3 of their process (electro winning and smelting) because it is more economic to do it at already established sites.

I don't agree kiwikarlos, I believe there is a big difference between melting electrically deposited PURE zinc and reforming it into ingots, than in taking a zinc concentrate and smelting it... if you read enough intec announcements you will see them espousing the virtues of NOT needing to do smelting

Tony.

 

[wintermute]

OK I read up a bit on zinc smelting, and I can see now where the lines get blurred... I was thinking along the lines of the original heat up and reduce oxides to metal type smelting, but I see there is also elctrolysis based smelting in common use now too.

Anyway I still think being able to sell a process that at the end result you have a pure metal rather than a sulfide, or concentrate is prefferable to just selling a different way to produce concentrate, as it gets rid of the middle man, but that's just me

Tony.

 

[dhukka]

Looks good to me .
Typical INL no hype just the facts.
Top 20 shareholders still there,and accumulating.
Basic earnings,projected at 20 mil,and thats before any of their existing projects in the pipeline,that should cover all costs.
Doesn't that put them on a PE of 5.

INL must hold 19+ tomorrow,or holders will be in for the long wait!
Good luck to all.

Juiceman,

I read both quarterly announcements and couldn't see any reference to earnings of $20m. They did receive payments of $2.36m and $2.0m for their share of the two shipments to date. Backing out their profits from share sales as chops suggests gives EBITDA of $1.2m or $0.6m per shipment. Again using chops numbers of $2m EBITDA per quarter that's $8m EBITDA for FY08. 1H07 depreciation charges were $1.15m. Lets assume $2m for a full year. Pre-tax profit of $6m, probably won't be paying taxes for a while because of prior losses so NPAT of $6m.

Assuming $6m NPAT for FY08 and paying no dividends, I use a 15% discount rate. A 20% return on equity (based on $6m NPAT / Avg Equity of around $31m) giving fair value of around $0.12.

 

[imajica]

your analysis is flawed as it does not take into account the ramping up from 1.5Mtpa to 2 MTPA at little or no additional cost - also the tailings resource is worth over $3 billion in situ value - a company is valued on its projected earnings growth from the expansion of its business - INL has massive growth potential - compared to stocks like: SMM - a market cap over 1 billion and won't see cash flow for many years - let's not be myopic regarding INL and take into account the greater overall picture

 

[dhukka]

your analysis is flawed as it does not take into account the ramping up from 1.5Mtpa to 2 MTPA at little or no additional cost - also the tailings resource is worth over $3 billion in situ value - a company is valued on its projected earnings growth from the expansion of its business - INL has massive growth potential - compared to stocks like: SMM - a market cap over 1 billion and won't see cash flow for many years - let's not be myopic regarding INL and take into account the greater overall picture

All valuations are flawed to some extent as they entail predictions about future earnings and prospects of the company which by nature are unpredictable. What I've done is lay out a considered estimate of future earnings based on INL's current activites which is far more than you have provided.

a company is valued on its projected earnings growth from the expansion of its business

Well that is certainly part of it. As stated before I have projected what can be reasonably expected from INL's current activities. Therefore I don't estimate earnings past FY08 and I don't ascribe any value to the tailings resource which is little more than blue sky in the forseeable future. I do assume that the company can consistently produce a 20% return on equity and that retained profits can be profitably reinvested at this rate.

If we take your assumption of 2MTPA which is an increase of one third and I therefore increase NPAT by one third we get NPAT of $8m for FY08 and a ROE of 26%. Applying a discount rate of 15% gives a value of $0.21.

 

[resourceboom]

Mate, I'd read todays announcements re expected ebitda's.
I'd rather rely on mment recent forecasts.

 

[Kipp]

Going through the lastest annt I hadn't fully realised how diversified the Hellyer tailings dam is... only 40% of the resource value is held in Zn- with the rest spllit between Lead, Silver and Gold. But the company seems primarily concerned with the Zn side of things (comparing their SP charts to LME Zinc etc). Any reason for this?

 

[dhukka]

mate, I'd read todays announcements re expected ebitda's.
I'd rather rely on mment recent forecasts.

Just read yesterday's announcement of $21.6m EBITDA based on a $1.75 US$/lb POZ. As has been discussed before, the problem with these forecasts is the little notes attached which tell you that EBITDA is not really EBITDA. Note 2 says

"For a 12 month period operating at 100% capacity. Excludes INL corporate overheads and technology expenditure"

What I assume this means is that EBITDA as represented by the slide is the EBITDA for the Hellyer Project and not INL as a whole. From the 1H07 report we can see the following corporate overhead expenses:

Administration expenses $0.6m ($1.2m annualised)
employee benefits expense $2.1m ($4.2m annualised)

There are a number of other smaller expenses that could be lumped under corporate but the 2 above are the major ones. $6m would be a reasonable estimate for corporate overheads based 1H07 results.

Technology spend is a little difficult to work out. In the P&L INL have an expense called "Hellyer demonstration plant expenses" totalling $3.0m ($6.0 annualised). There is also a smaller maintenance charge of $0.06m ($0.1m annualised). Is all this related to technology spend? If it is all related, lets call it $6.0m. So we have:

Hellyer Zinc Project EBITDA $21.6m
Corporate overhead -$ 6.0m
Technology cost -$ 6.0m
INL EBITDA $9.6m
Depreciation $2.3m
Pretax Profit $7.3m

The technology expense is a big if but considering, as Imajica suggests, INL is ramping up to 2.0MTPA costs as forecasted here could well be on the low side. I'll stick with my forecasts rather than management's until more info comes to light.

 

[Sean K]

I think I put this in the potential breakout thread a couple of days ago when it had broken those lines of down trend resistance and looked set to break up through 20 cents with momentum clearly up. I thought 20 was a critical resistance area and a psychological point so breaking this would have been good darts. Gapped up and failed making 20 even stronger resistance.

 

[juiceman]

Going through the lastest annt I hadn't fully realised how diversified the Hellyer tailings dam is... only 40% of the resource value is held in Zn- with the rest spllit between Lead, Silver and Gold. But the company seems primarily concerned with the Zn side of things (comparing their SP charts to LME Zinc etc). Any reason for this?

IN my opinion,it's because of the proliferation of zinc in the general area.
Consider BSM and the high grade zinc deposit;s around Ord River,going into production about now.
Zinc is their cash cow for now,but try and remember,there are many known rabbit's in their hat.
To-date all expectations have been met or exceeded, EAF dust will be a huge money spinner for INL when (they) choose to put it in production (they have the stock and tools to do it at their leasure).
Holding INL longer term,but getting a whole-lot bored with it at the moment.
As per Kennas post it must break through 20 cent's,or where all in for the long wait!
Look at what the market did and this mother did NOTHING!!!!!!

 

[juiceman]

Juiceman,

I read both quarterly announcements and couldn't see any reference to earnings of $20m. They did receive payments of $2.36m and $2.0m for their share of the two shipments to date. Backing out their profits from share sales as chops suggests gives EBITDA of $1.2m or $0.6m per shipment. Again using chops numbers of $2m EBITDA per quarter that's $8m EBITDA for FY08. 1H07 depreciation charges were $1.15m. Lets assume $2m for a full year. Pre-tax profit of $6m, probably won't be paying taxes for a while because of prior losses so NPAT of $6m.

Assuming $6m NPAT for FY08 and paying no dividends, I use a 15% discount rate. A 20% return on equity (based on $6m NPAT / Avg Equity of around $31m) giving fair value of around $0.12.

RE. my earlier post 30 April 20mil PE of 5
Look at INL's pres 3/5/07
Apart from many other things: consider:
EAFD BENEFICATION
INL's suppliers dump 20-25000 tpa
Pay INL $100+$100 to transport it to Burny = $5,000,000
INL processes the dust,containing 30-40% zinc
20,000 tn @ 40% zinc =8,000 tn zinc ingots
8,000 tn zinc @$4000 pt = $32,000,000 (not bad for rubbish)

The world produces: 3-5mtpa of this environmentally unfriendly rubbish,
INL has proven that they can process it (thinking )
People pay them to take it away.

I will be happy to be corrected

PS I read somewhere on the nett that Ivanhoe Mines was paddling their own canoe in China promoting their INTEC method re zinc? This was some month"s ago,but can"t find it now. Has anyone else seen that? (not happy)

 

[resourceboom]

If we take your assumption of 2MTPA which is an increase of one third and I therefore increase NPAT by one third we get NPAT of $8m for FY08 and a ROE of 26%. Applying a discount rate of 15% gives a value of $0.21.

I think your conservative analysis in you posts is quite acceptable, so if you value the share at 21c would you not agree that there is not too much downside, and plenty of scope for upside,

eg EAFD, Zeehan Slags, IHRP with high probability of success.
I also would definitely include in any INL valuation that in a few years INL will own 100% the HZCP project, doubling the revenue!

Personally I think the zinc price is much more likely to go higher rather then lower, but to be fair, would agree with you and value at spot.

And finally the aspect that would add great value to the company is licensing the tech, but I would probably not ascribe any value at this point in time, like the market is not.

 

[juiceman]

I think your conservative analysis in you posts is quite acceptable, so if you value the share at 21c would you not agree that there is not too much downside, and plenty of scope for upside,

eg EAFD, Zeehan Slags, IHRP with high probability of success.
I also would definitely include in any INL valuation that in a few years INL will own 100% the HZCP project, doubling the revenue!

Personally I think the zinc price is much more likely to go higher rather then lower, but to be fair, would agree with you and value at spot.

And finally the aspect that would add great value to the company is licensing the tech, but I would probably not ascribe any value at this point in time, like the market is not.

Reguarding the successfull Burni pilot plant.
In there latest presentation INL states:
The plant will go into limited production (cash flow)
Used to train more personal
Demonstrate it"s operation to other insto"s and company"s (why)
Worley parsons,who designs and builds things like this,has inmo given this the green light.
They have just appointed a respected commercial lawyer to the board, and i expect they will use his talent. (for which of the below
Licensing the tech,imho thats to easy.
Constructing their own plant overseas ; thats to hard
JV with an overseas established company surrounded, by big piles of enviromentally unfriendly EAFD

 

[camaybay]

Juiceman,

Post 863 refers to Ivanhoe's intec process to China interest.

 

[dhukka]

RE. my earlier post 30 April 20mil PE of 5
Look at INL's pres 3/5/07
Apart from many other things: consider:
EAFD BENEFICATION
INL's suppliers dump 20-25000 tpa
Pay INL $100+$100 to transport it to Burny = $5,000,000
INL processes the dust,containing 30-40% zinc
20,000 tn @ 40% zinc =8,000 tn zinc ingots
8,000 tn zinc @$4000 pt = $32,000,000 (not bad for rubbish)

The world produces: 3-5mtpa of this environmentally unfriendly rubbish,
INL has proven that they can process it (thinking )
People pay them to take it away.

I will be happy to be corrected


PS I read somewhere on the nett that Ivanhoe Mines was paddling their own canoe in China promoting their INTEC method re zinc? This was some month"s ago,but can"t find it now. Has anyone else seen that? (not happy)

No need for corrections you've outlined the revenue side clearly, how about the cost side? I've purposely been conservative by leaving the benefication out of my calcs. It does represent upside, exactly how much is difficult to quantify. Maybe by the time I get enough evidence it will have run but I'd rather be pretty sure than guessing.

 

[dhukka]

I think your conservative analysis in you posts is quite acceptable, so if you value the share at 21c would you not agree that there is not too much downside, and plenty of scope for upside,

eg EAFD, Zeehan Slags, IHRP with high probability of success.
I also would definitely include in any INL valuation that in a few years INL will own 100% the HZCP project, doubling the revenue!

Personally I think the zinc price is much more likely to go higher rather then lower, but to be fair, would agree with you and value at spot.

And finally the aspect that would add great value to the company is licensing the tech, but I would probably not ascribe any value at this point in time, like the market is not.

Agreed my analysis is conservative and there is more upside risk than downside. INL mentioned getting brokerage coverage at some point soon. I'd like to see the analysts numbers for FY08 and FY09. Hopefully INL would make it available on their website along with the other media reports.

 

[wintermute]

Few things... First the use of the burnie demo plant... if I'm not mistaken, Intec have called this semi commercial for a reason, I believe that it will not break even price wise so don't count on it contributing to cash flow, I think it will be a sink rather than a source. I'm pretty sure they have stated that it will cost more to run than it generates, this is because it is too small, and that means inefficiencies, this was done of course to prove the process (with as low a risk, and as low a capital outlay as possible) and was never originally intended to go into commercial operation, I believe they will use it to "tweak" things so that they can make better use of the fully commercial plant.

Second, I gave up ages ago trying to work out potential cash flows from Intec's operations... too many details have not been supplied and trying to reconcile EBITDA amounts in presentations with estimates from what has been released proved completely frustrating to me. I decided to simply wait and see full year reports... it is ok to do estimates if you know all of the relevant info, but we don't so I think it is a fruitless exercise.

Finally I'll post my latest Intec graph. Kennas is concerned about breaking through 20c... I'm not, because of this graph... maybe I'm wrong, but I think on the longer term INL is still in an uptrend channel and has just bounced off the bottom trend line... I don't think it will be more than a month or two before it is above, and stays above 20c.

I may be a bit unconventional in my charting at times, but rules are meant to be bent or broken.. unorthodox methods have worked for me in the past (in many areas other than charting) I've often been told that won't work, but the proof is in the pudding as they say we shall see

If you take into consideration the latest gem of info released, that MBL has 8.7% of intec on a fully diluted basis, something I have mentioned was coming (possibly only at HC) based on announcements last year about the loan facility and the issue of options to MBL if the facility was used past (I think march this year) and the fact that Macquaries options are well in the money, It may not be too long before we see a new substantial holder on the books.

I was speculating elsewhere recently that the price may remain low for a while, a cap-raising may happen (or the issue of more options) and then Macquarie would play their ace and surprise the market with a substantial holding notice however it seems the cat is out of the bag now. I've seen what an initial substantial holder notice from MBL can do to a penny stocks share price, and I'm looking forward to the same thing happening for INL... that's not to say it will happen, but I think the chances are that the substantial holding notice will come, and when it does the sp will rise.

Tony.

 

[juiceman]

Few things... First the use of the burnie demo plant... if I'm not mistaken, Intec have called this semi commercial for a reason, I believe that it will not break even price wise so don't count on it contributing to cash flow, I think it will be a sink rather than a source. I'm pretty sure they have stated that it will cost more to run than it generates, this is because it is too small, and that means inefficiencies, this was done of course to prove the process (with as low a risk, and as low a capital outlay as possible) and was never originally intended to go into commercial operation, I believe they will use it to "tweak" things so that they can make better use of the fully commercial plant.

Second, I gave up ages ago trying to work out potential cash flows from Intec's operations... too many details have not been supplied and trying to reconcile EBITDA amounts in presentations with estimates from what has been released proved completely frustrating to me. I decided to simply wait and see full year reports... it is ok to do estimates if you know all of the relevant info, but we don't so I think it is a fruitless exercise.

Finally I'll post my latest Intec graph. Kennas is concerned about breaking through 20c... I'm not, because of this graph... maybe I'm wrong, but I think on the longer term INL is still in an uptrend channel and has just bounced off the bottom trend line... I don't think it will be more than a month or two before it is above, and stays above 20c.

I may be a bit unconventional in my charting at times, but rules are meant to be bent or broken.. unorthodox methods have worked for me in the past (in many areas other than charting) I've often been told that won't work, but the proof is in the pudding as they say we shall see

If you take into consideration the latest gem of info released, that MBL has 8.7% of intec on a fully diluted basis, something I have mentioned was coming (possibly only at HC) based on announcements last year about the loan facility and the issue of options to MBL if the facility was used past (I think march this year) and the fact that Macquaries options are well in the money, It may not be too long before we see a new substantial holder on the books.

I was speculating elsewhere recently that the price may remain low for a while, a cap-raising may happen (or the issue of more options) and then Macquarie would play their ace and surprise the market with a substantial holding notice however it seems the cat is out of the bag now. I've seen what an initial substantial holder notice from MBL can do to a penny stocks share price, and I'm looking forward to the same thing happening for INL... that's not to say it will happen, but I think the chances are that the substantial holding notice will come, and when it does the sp will rise.

Tony.

Great post, just like the many on this thread over the last six month's.
Starting to read like an Agatha Christy noval.
Now to grind the axe, re EAFD Burnie
My words; Limited Production
Their words; Semi Commercial. (good point, think i will give them a call on Monday, and ask the question. Will post if i get an answer
RE; cash flow"s and EBITDA, I think i give up too. There are just to many buttons that could be pushed all at the same time, IE. Ord River processing fee"s etc?:
Re, your chart there virtually saying the same thing.
Yours for consolidation at or above 20
Kennas is looking for a tecnical trade point with breakout through 20. Watch the volume next week for our answer.
Tony a very important point in your post;RE loan facility with Macquarie Bank and their right to exercise opies if loan was still outstanding past April? i think.
Do they really want to give them to Macquarie for that price?
As at 31 April they had $3664000 cash at bank,
They owe Macquarie $2000000 which ^gives M the right to the opies,
Why not pay them out?
As at 31 April
Further repayment of which is anticipated during the current! quarter,(what later that afternoon) or should that of read next! quarter:

These Guy's are not fool"s
To date the only fair (to all parties deals) has been with Polymetals,and Orian Holdings Corp (Ivanhoe Mines ) re; lic funding agrement 7 Aug 2003.
(because they needed capital and creditability )
Just unniversity rock oligests, i don"t think so.
Look at these deals:
31 Dec 2003 purchase Hellyer Mill etc A$1,597,973 from recievers.
Replace To-day A$100,000,000, thats 1.5 cents in the doller.
17 Feb 2004 recieve R and D Grant from Gov A$1,430,000, pay"s for Hellyer.
10 Mar 2004 purchase from Encore Metals (Zeehan Zinc) pay"s A$30,000 +4.5 mil inl share"s + opies,
+ others.
Not bad share traders either:
IMO the JV with JRV, could never happen because, JRV needs more capital than INL has. Let"s see if their Chinese come out from behind the bushes.

Some of inl"s sp weakness of late, could be due unlucky traders punting on that JV.

Personally i think INL is in pressure-cooker mode, just don"t know when she"s gonna blow.
Good luck to all patient INL holders.