Circle Property Share Discussion Threads

[pinhead3] 27/2/2006 22:20

Wassapper
I used the copper prices in the NPV assessments of $1.25/lb for Kinsenda & $1.00/lb for Hanoba-an. Apparently $1.25/lb is considered the long term price for copper!
Personally I think that is pretty low but I'm happy to go with it & have a big upside.

Today's 3 month copper price is $4693.50 ($-197) tonne or $2.13/lb.

As an Accountant (I know terrible isn't it!) I can relate to NPV calculations so I'm comfortable using them.
The problem with most projects is that you don't know what all the costs are, in the NPV calculations the mgt will have included all the cash inflows & outflows including financing costs.

[wassapper] 27/2/2006 22:16

Pinhead - I have alos posted this on your excellent valuation thread:

pinhead - that is an excellent piece of work. What copper price did you use? I can't say I followed all of it in detail but it looks very good. You obviously put in a lot of effort so thank you.

Having followed mining stocks for nearly five years I find the the market rarely gives a fig for NPV valuations (day to day). They have their use, and ultimately they are very important, but show me a miner that trades on NPV? (expecting deluge!!) It is a great starting point and builds CONFIDENCE when investing ie you are not buying a pup. Because CRC will be a producer next year, I prefer to look at pe ratios. My calculations posted last week on the main thread show a forward 2007 pe at full production of about ONE based upon the prevailing share price. I reckon they should be at least (and this is modest) on 8 so we have my x8 and your x 5. I would plumb for something in between. If the copper price stays above $4,000 per tonne and the DRC behaves, I think 5-8 x from where we are is eminently possible.

[wassapper] 27/2/2006 22:15

pinhead - that is an excellent piece of work. What copper price did you use? I can't say I followed all of it in detail but it looks very good. You obviously put in a lot of effort so thank you.

Having followed mining stocks for nearly five years I find the the market rarely gives a fig for NPV valuations. They have their use, and ultimately they are very important, but show me a miner that trades on NPV? (expecting deluge!!) It is a great starting point and builds CONFIDENCE when investing ie you are not buying a pup. Because CRC will be a producer next year, I prefer to look at pe ratios. My calculations posted last week on the main thread show a forward 2007 pe at full production of about ONE based upon the prevailing share price. I reckon they should be at least (and this is modest) on 8 so we have my x8 and your x 5. I would plumb for something in between. If the copper price stays above $4,000 per tonne and the DRC behaves, I think 5-8 x from where we are is eminently possible.

[tonystringy] 27/2/2006 22:14

Nice work pinhead!

-Only wish I had the time.

Maybe soon........making a decision on the day job by the end of this week.

Currently have 13 holdings including CRC and most doing very well......looking a bit like a foregone conclusion. :-)

[nikesh2] 27/2/2006 21:52

also add the holdings post u did before , that will get attention

[nikesh2] 27/2/2006 21:52

CAN U ADD CHARTS AS WELL please

[pinhead3] 27/2/2006 21:50

If anyone can add anymore to the above, please post below.

[pinhead3] 27/2/2006 21:46

Nikesh
Thanks. I've created a new thread for the valuation above.

[nikesh2] 27/2/2006 21:38

basically click on FREE BB
and then click add discussion

[nikesh2] 27/2/2006 21:31

pinhead 3
excellent post you should get that in the header
i couldnt have done better

[pinhead3] 27/2/2006 20:50

After collating a fair amount of info on CRC this weekend I put together valuations for the whole company using the current shares in issue, fully diluted shares (after options) & a discounted valuation using my personal risk for each project.You can ignore the discount or use your own.
Current shares in issue 46.794m
Fully diluted shares 51.448m
Exchange rate $1.75/£1

MMK – Congo (Kinsenda) 1.848 bn lbs of copper resources (5.3%).
From the recent RNS a NPV for the project was determined at $143m based on copper at $1.25/lb, 13 year life, 10% discount & IRR 67%.Capital investment $38m. Management expect the resources & life of the mine to be considerably extended., currently they are looking at the project plan to additionally increase payback.
As the mine is currently submerged & given other risks involved detailed below I would discount Kinsenda at 20% of fully diluted price as a reasonable target for 2006.
Valuations
Current shares £1.75
Fully diluted £1.59
Discounted £1.27 (2006 valuation - now)

MMK – Congo (Misoshi) 1.276 bn lbs of copper resources (2.4%).
With the Misoshi & Kinsenda mines being only 40km apart & sharing good infrastructure I believe that the NPV valuation of Kinsenda is a good guide for valuing Misoshi, even though the copper concentration in the ore is less than half of Kinsenda many of the refining assets should be able to be shared that should improve the NPV. Misoshi has 69% of the copper resources of Kinsenda so a NPV as a starting point of $99m seems fair. Given the additional uncertainty I would discount Misoshi at 40%. Initial production has been stated at 4,000 tonnes pa, I don't expect that to be increased until 2007/08 when Kinsenda is up & running. Capital investment at Misoshi is unknown but should be substantially lower than Kinsenda.
Valuations
Current shares £1.21
Fully diluted £1.10
Discounted £0.44 (2008 valuation)

MMK – Congo (Lubembe) 2.000 bn lbs of copper resources (2.2%).
Unlike Kinsenda & Misoshi Lubembe is a green site with little drilling so far, as a consequence I wasn't able to find as much information. I've assumed the same rationale on Lubembe as Misoshi with Lubembe having 119% of copper resources as Kinsenda giving a starting NPV of $170.2m. With the additional unknown factors I've increased the discount on Lubembe to 50%. Capital requirements are unknown. I don't expect much development until 2008.
Valuations
Current shares £2.08
Fully diluted £1.89
Discounted £0.95 (2008 valuation)

Haib – Namibia estimated 2.000 bn lbs of copper resources (0.37%) CRC share 60% = 1.200 bn lbs.
METS review process is currently underway & due in May 2006 a feasibility study will then be carried out & finalised by the end of 2007 producing a bankable resource value.
Haib is a deep mine similar to the Congo & has been drilled previously. Until the feasibility study it is difficult to put a value on Haib unless you use the Kinsenda NPV as a guide.
Haib has an estimated copper resource of 108% of Kinsenda giving a starting NPV of $155m,CRC own 60% currently reducing that to $92.9m. Given the additional uncertainty I would currently discount Haib at 60%, a full valuation won't be available until the end of 2007. CRC share increases by 10% on spending $1.0m & potentially to 90%.
Valuations
Current shares £1.13
Fully diluted £1.03
Discounted £0.41 (2007 valuation)

Hinoba-an (Phillipines) 2.000 bn of copper resources (0.373%) CRC share 92.5%.
HHPI 1998 study gave the project an NPV of $268m using $1.00/lb for copper, 20 year life, 10% discount & IRR 28%.Capital investment estimated at $268m. Bankable schedule is due at the end of 2006, is already 25% complete & is looking like increasing the reserves by 10%. HHPI study excluded the top 15m of the side as assumed did not contain copper resources, during the current study copper has been found in the top 15m. A 3% royalty is due on all copper sold which would amount to $60m on the above, assumed not to be included in the 1998 study. CRC 92.5% share would then give a base NPV of $169.3m.
Until the revised study is complete at end 2006 I would discount Hinoba-an at 50%.
Deposits of gold, silver & molybendeum have also been found at the site but have not yet been assessed.

Valuations
Current shares £2.07
Fully diluted £1.88
Discounted £0.94 (2006 valuation)

Cash estimated as $9.4m
Valuations
Current shares £0.11
Fully diluted £0.10
Discounted £0.10 (2006 valuation)

Upsides
Current price of copper is considerably higher than used above $2.20 /lb.
Kinsenda expected to last longer, have higher resources & have higher NPV.
Hinoba-an already looking to be 10% higher plus possibility of gold, silver & Molybendum.
Haib holding can be significantly increased by minimal outlay.

Risks
Political risk in Phillipines, Congo & Namibia
Copper price may fall on failing Indian / Chinese economies.
Lubembe & Haib unproven.
Kinsenda & Misoshi are currently flooded so could hide unknown problems
Huge capital required for projects.

When taking the above into account you get the following valuations
Current shares £8.35
Fully diluted £7.59
Discounted £4.11

As a short term (2006) target I would include Kinsenda, Hinoba-an & cash (from above) or £2.32. Based on Kinsenda alone we should be over £1 now.
If the Hinoba–an bankable schedule comes in as expected £3 could be achievable by the end of 2006.

If anyone has any comments, observations or can spot any errors let me know.

I am very bullish about CRC prospects & as such have bought in as a long term hold, I expect a 5 fold increase by the end of 2008.

[pinhead3] 27/2/2006 19:24

Of the 46.8m shares in issue over 80% are locked up, held by institutions or management. This leaves approx 8.5m in 'free' market.
Since the RNS last week 4.1m shares have been traded or almost 50% of the free market.

I had two buy orders in this morning of 3,000 shares each that took 1 1/2 hours to fill.

Given the volume traded today, the trouble filling the early small orders & how the price held up I also believe someone is building a stake.

Once CRC gets on the radar of the PI herd the share price will fly due to the lack of liquidity.

[e-boffin] 27/2/2006 16:30

Would have thought that was 350k roll-over. However, the 550k T-trade later is interesting.

[nikesh2] 27/2/2006 16:27

700k picked up at 2.56pm
big buyer

[e-boffin] 27/2/2006 15:13

WINS on 86 bid and the rest on 82. They must have a BIG buyer.

[mad4it] 27/2/2006 10:23

The 2x100k looks like a matched bargain trade: seller @ 85p, buyer @ 85.5p.

But it's hard to say for sure.

[nikesh2] 27/2/2006 10:10

trade on fri was at 86p so diff trade

[e-boffin] 27/2/2006 09:59

nikesh

Yes, like the 100,000 on Friday night after hours. Looks like you were right and there is a big buyer out there accumulating.

EDIT: I take it back. The 100k trade on Friday night seems to have disappeared from the list so they must be showing the same trade again.

[nikesh2] 27/2/2006 09:56

it is buy was at 8.46