Kenmare Resources - re-rating due soon?

airrage...a couple of responses from the 3iii bb to the re-post of valuations....


"Well,I think I will have a go at proving the Earth is flat and the moon is made up of green cheese

I am a holder of a fair number of KMR shares and wish the ADVFN poster was correct but I think a reality injection is required

1/ A DCF rate of 8% ????? 2%-3% above US Government paper ??? and about 1.5 %-2% above the cost of capital for an investment grade company???for a project yet to be completed in Africa. I would have thought at least 12% - 15% and maybe more

2/ Conveniently the poster applies the market price for the relevant minerals as if they were in the warehouse. They are not in the warehouse,they are still in the ground and have to be mined/excavated, processed/refined,shipped etc. I would say a mineral valuation of 30% and that could be generous

3/ KMR has completed most of the civil engineering work but there is still a fair part of the mechanical engineering work to be completed so not there yet

Most DCF analysis I have seen point to a price of between 75p - 100p and allowing for a successful stage 2 and a possible bid premium let's say between 1.50 - 2 pound max at which level I would be delighted.

Two other points: BHP has delayed commencing its Corridor Sands project in Southern Mozambique so this bit of serious competition is out of the way for a couple more years, and I suppose could make BHP a possible acquirer.

Rio is going ahead with its heavy sands project in Madagascar,which is massive, so presumably Rio will not be a bidder

Rufiji

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Agree with your post. I too have lots of these shares and would love the price to skyrocket - but I believe there needs to be some caution.

One additional point which is also worth stressing is how much value to place on the extra resources.

The poster implies that the NAV could quadruple (or more) - well perhaps that's true. But more importantly from a share price perspective is whether these extra resources would translate into higher earnings. If you think that Kenmare could gear up sales at the same rate then perhaps; but if all the resources does, is to extend the mine life to 90 years, then I wouldn't add much more than a few pence to the share price - once you allow for discounting, the value of those cashflows over 20 years is pretty small.

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