Toledo Mining Corporation plc

wadein, these are some calculations i did for the stock 2 weeks back, if all obstacles are overcome, the main one imo being the imminent permit approval then i cant see anything else getting in the way of the company. The asset is there, the initial road is almost built and i dont foresee any furthe major obstacle in their way....

Plain Vanilla - 9 Oct'05 - 14:15 - 2159 of 2479 edit

I've been quite surprised by the lack of comment made on this board on the minesite presentation recently made by Chris. I believe this not only gives the listener/viewer an interesting background and introduction into TMC but it also gave a glimpse of the enormous upside this company possesses imo.

CK quotes that the 3 projects TMC is involved in combined, contains enough resource to make Toledo the 3rd largest Nickel company in the world - on a deposit only scale. Berong alone is the 4th largest deposit in the world!

Berong - 260 million tonnes
Celestial - 77 million tonnes. The NPV on this deposit alone is $298mln!
Ulugang - 22 million tonnes.
(All figures above do not take into account the possibility that only the higher grade resource will be extractable due to costs)

The company is also funded entirely at present for all mine preparations on a direct shipping basis at least until 1st qtr 2006, by then the company will be enormously cash generative just on the current 350,000 tonnes PA deal with Nippon. Not only does this prevent worries concerning future possible fund raising by share sales etc but it also gives TMC imo, a great bargaining chip when seeking future financing if need be, something not many small caps can claim or have the ability to achieve. Similar to AEN did when they announced just how much coal exactly they were sitting on - they had banks falling over themselves for financing deals on a cheap basis too. But the difference here is the enormous cashflow TMC will be generating as of 1st qtr next yr, something AEN couldnt boast!

On the Nippon contract alone, TMC could expect the following net cashflow Per annum: If the Nickel was sold on the most conservative figure of $5/lb (operating costs of $1.3/lb) net $3.7/lb = total equity annual cashflow $14.4mln. TMC's share is 56.1% = $8,102,000 pa for the next 5 yrs (contract term). This is obviously just from existing Nippon deal alone. Imo net to the company, excluding tax and other minor costs that would give TMC net = ($/£ 1.70) £4,602,000 cashflow pa. This cashflow figure is net of all operating costs too and is net to the company straight to the bottom line. So on an EPS basis that would be 30p per share (15.2mln share post consolidation, alos not taking into account warrants and options). On a conservative PE ratio of say 12 alone this backs the company up on a share price of £3.61. This figure also doesnt acocunt for the fact that the deal is only for 5yrs but with the commodity bull run expected by some to last a further decade well who knows... this calculation is based on the TMC contract with Nippon which has already been announced remember!

Now the added bonus and tremendous upside presented by the company is really highlighted when you add on the possible deals Chris mentions in his presentation and further amounts of Nickel to be geerated by the company post further studies and project work. Chris has mentioned twice now, at the minesite presentation and recently at the AGM that Nippon are interested in taking the contract up to possibly 600kt/pa and an additional contract supplying an Australian company with a further 500kt/pa, combined (if this fully goes ahead) that would make TMC a 1.15 million t/pa supplier to these two partners. Again on a conservative valuation of 5$/lb that would generate cashflow net of costs of $20,641,000 to Toledo (56.1% stake) or £12,141,000 pa, an eps 79p! on a pe multiple of 12 that would put TMC on a trading price of £9.48 per share!

Now these calculations are very rough and excludes further ongoing work and development costs etc such as the $20mln development cost of Berong but imo, this highlights the incredible upside this stock possesses. It is very diffuclt to judge the full costs going forward for such an early stage operation but if Nickel was to sell for $7/lb you could increase that share price forecast to £13 per share! Nickel markets are looking very impressive too and demand especially by China is being maintained.

I hope that gives the newbies a very rough calculation to this operation. I would most welcome a new broker note on this company following the steps they have made since ipo, perhaps this is something CK could request from the house broker. No wonder 3 institutions are looking to buy in and more importantly no wonder Rab Capital were forecasting possible EPS of 3 within 2 yrs time. (that quote was made before the 50:1 consolidation, therefore £1.50!) dig a little deeper and you can see how those forecasts can be found.

;-)