a few highlights of that report:
Investment Highlights
• Cheap but execution required. Assuming YML executes a 2mtpa trucking
(CY10) - 5mtpa rail operation (CY11) we derive a valuation of A$1.81/sh
(DCF10%). We consider a discount is appropriate given uncertainty over
infrastructure however, on peer comparison YML looks cheap
(EV:Resources A$1.92/t in-situ versus a sector average of A$13.25/t).
• Maiden resource exceeds expectation. YML released a maiden 44mt
resource at its 100% owned Marillana Iron Ore Project (MIOP) located
100km NW of Newman, WA. This number comfortably exceeded
management’s 30mt estimate and is classified 100% Indicated under JORC.
• Positive start; now looking for critical mass. YML is reliant on securing
third party rail access and we estimate circa 70mt of mineable resources is
required to justify the construction of a dedicated spur line. YML has set a
resource target of 100mt with drilling to recommence in November.
• Strategy aimed at production. Incoming MD Wayne Richards has been
the catalyst in aligning YML with a potential development. Richards is a
career miner and a transition to mining is the stated strategy. To this end,
metallurgical, environmental, project evaluation and logistics studies are
progressing with a scoping study underway, targeting 1Q CY08 completion.
• Infrastructure options. YML is fortunate in having several potentially
feasible infrastructure options at hand. BHPB’s Newman rail line traverses
the tenement 4km north of Marillana, FMG’s open access Cloud Break line
is 35km to the north, and RIO’s Yandicoogina Line is 40km to the south.
•
Striking a deal the key. Uncertainty over a transport solution has
translated to a considerable market discount on peer comparison. While we
consider a discount is appropriate, we expect third party negotiations to
accelerate into CY08, with any emerging clarity to underpin a re-rating.
I think Kiwi you underestimate the the possibility of all IO stocks increasing pending the ann of the the big 3 stocks negotiations. 10 to 20 % increase then I agree with your summation. anything great than that then YML should go higher than $1.80(wait for your input kenna)
I wouldn't be surprised at a less than 20 % increase but a new trading structure that allows the market to set prices. BHP have hinted at this.
cheers