Circle Property Share Discussion Threads

[stemis] 01/3/2006 07:46

pinhead3,

If I don't use 45% of 54,000 and just use the 54,000 the NPV becomes $358M!

Not all the capex will be upfront so that will also increase the NPV.

Yes but not much. Delaying $23M of capex in my model by 2 years reduces NPV on the above by only $4M. Even if I delay the cash flows from the sale of copper by 1 year it only reduces NPV from $358M to $323M.

The $143m is definitely the CRC share.

That's certainly how I read it and the NPV just couldn't cope with reducing the NPV to $107M!

[johnwall] 01/3/2006 07:36

pinhead3

Yes, sometimes I read it like that but other times I read it as "the projected financial return to CRC is highly favourable with an estimated IRR of 67% and a NPV (of the whole project) of US$143m". I think the IRR would be the same whether we're just talking about CRC's portion or the whole project, but it just seemed slightly odd to me for an NPV not to be for the whole project. Nevertheless, I agree that your interpretation is the most logical - I just tend to take a conservative view of things, preferring surprises on the upside rather than the downside!

[pinhead3] 28/2/2006 22:46

John
The $143m is definitely the CRC share.

'The projected financial return TO CRC is highly favourable with an estimated IRR of 67% and NPV of US$143 million, at an assumed long term copper price of US$1.25/lb and a discount rate of 10%. The high financial rate of return reflects the extremely high grade of Kinsenda's reserves (5.3% copper) coupled with the project's low capital costs.'

[johnwall] 28/2/2006 22:34

SteMis

Thanks for posting your DCF model. As I mentioned last week, I also had a go at doing this - I'd post it for comparison if only I knew how to format it! Since I don't, however, I'll just outline my assumptions, which look a little different to yours.

I used the table on page 3 of Anvil Mining's 2005 prelims (announced on 7.2.06) as the basis of my model, following a suggestion from Wassapper. I think it's well worth a look at. Anyway, based on this my annual figures for production are as follows -

Ore processed = 1.2mt X 5.3%grade = 63.6kt contained Cu
63.6kt contained Cu X 85% recovery = 54kt = 119m lbs Cu produced
119m lbs Cu produced X 91% (figure from Anvil) = 108.3m lbs PAYABLE Cu in conc
108.3m lbs X $1.25/lb (higher in first two years) = $135.4m value of Cu produced
Cash costs of $0.68/lb of payable Cu
Other costs of $0.35/lb of payable Cu - a 'balancing figure' to get to approximately the correct NPV - Anvil figure is $0.5
Tax at 15%

Knowing practically nothing about mining economics I have no idea whether this is anywhere near 'right' but it gets me to about the right NPV and IRR (ignoring the possibility of compensating errors!). BTW, I took the RNS NPV figure of $143 as the total for the project but the wording was a bit ambiguous and it can also be read as just CRC's share.

I'd be very interested in any further thoughts you may have on this.

[pinhead3] 28/2/2006 18:43

Stemis
Not all the capex will be upfront so that will also increase the NPV. $23m of the capex is for a new concentrator, initially they'll be using the refurnished one from Misoshi.

Copper up today $85 a tonne, current price $2.17/lb & still on an 12mnth upward trend. $1.25/lb does look very low.

[nikesh2] 28/2/2006 18:14

good post on the other CRC thread

[stemis] 28/2/2006 17:32

I think what people fail to realise with NPV calculations is that they unwind over time.

Consequently although the NPV of Kinsenda is $143M now, it will grow by 10% per annum just by the unwinding of the discount.

I have attempted to replicate the NPV calculation Conc. Cu Cu Cu Cu Cash Cash Pr Capex Net CasDiscoun NPV
Tonnes % Tonnes lb'M Price -Cost - $'M $'M $'M Factor $'M

Year 0 -38.0 -38.0 1.00 -38.0
Year 1 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.91 27.8
Year 2 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.83 25.2
Year 3 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.75 22.9
Year 4 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.68 20.9
Year 5 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.62 19.0
Year 6 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.56 17.2
Year 7 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.51 15.7
Year 8 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.47 14.2
Year 9 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.42 12.9
Year 10 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.39 11.8
Year 11 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.35 10.7
Year 12 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.32 9.7
Year 13 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.29 8.8
Year 14 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.26 8.0
Year 15 54,000 45% 24,300 53.56 1.25 0.68 30.5 30.5 0.24 7.3

Project Total $194.20M

CRC interest 75%

CRC NPV $146MAlthough there are some obvious errors in its (it works on full years and production to commence 12 months from now not 18), it gives an answer very close to the $143M in the RNS. The only way I can make it work it to take the copper produced per annum as 45% of 54,000 tonnes of concentrate, although I read the RNS as production per annum being 54,000 of copper in a 45% concentrate.

Assuming my NPV is correct, then it illustrates a number of things.

1. At $2/lb copper price, the CRC NPV rises to $375M (=£215M)
2. Net cash profit to CRC is $23M per annum (=£13M compared to a market cap of £39M)
3. Payback on the initial investment is less than 2 years.

[e-boffin] 28/2/2006 17:13

goatherd

Yes, my mistake. I now see it in a far more positive light.

Looking forward to tomorrow as long as New york can sort themselves out.

[goatherd] 28/2/2006 17:11

e-boffin,

I think you are perhaps confusing a T trade type with a T+ trade. I agree the latter can simply be a short term trade. However the "T" trade is a single protected transaction and is quite different. It tends to be for a large buy/sell and often indicates an institutional buy.

The advfn definition of a T trade is -
'T' If reporting a single protected transaction.
A protected transaction occurs when a large order is going through the market. The buyer (or seller) may wish to keep the order anonymous from the rest of the market as the size of the order could greatly alter the price of the stock. With a protected transaction, the dealer will put the trade through in small quantities rather than knock the whole order out in one hit. The entire transaction is reported once the deal is completed. The LSE is notified at the start and at the end of the transaction. However, the market as a whole isn't told until the end, thus the order is protected.

Richard

[nikesh2] 28/2/2006 17:05

somebody def building a large stake of the free shares in issue, not that there are many, and somebody offloading a tiny bit to try and match it, maybe we have a new institution on board

[nikesh2] 28/2/2006 17:03

somebody building a stake for def!!!!!!!!!
no room for day traders on this one apart from the next swing up
remember limited free shares!!!!!!

[e-boffin] 28/2/2006 17:00

nicksig

Oh. I assumed it was a T-20 or some such. Thanks. Makes me feel happier.

[nicksig] 28/2/2006 16:59

e-Boffin. T trade = single protected transaction. Nothing to do with 'hot money'.

[e-boffin] 28/2/2006 16:48

Well, I'm impressed. Shame it was a T-trade though. I always feel this is hot money which will move out just as quick as it came.

Still, a good performance considering the Dow was down 100 points earlier. It gives us the small drop which I wanted in order to make the chart look good.

Onward and upward from here. Next stop £1.

[tonystringy] 28/2/2006 16:44

-£390K is pretty big!

[e-boffin] 28/2/2006 15:43

All sells since 12:15-ish and then they put the offer up to 88. Strange. Can only assume a big buyer who is soaking up all these sells.

[nikesh2] 28/2/2006 10:13

I WILL top up in morning to start the next rise

[nikesh2] 28/2/2006 10:00

i agree e-boffin
makes the chart look better

[e-boffin] 28/2/2006 09:54

Believe it or not, but I wouldn't mind a slightly down day today. Just a penny or two. Would make the chart look good for the next leg up.

[nikesh2] 28/2/2006 09:16

a flat day would be excellent followed by another large rise

[nikesh2] 28/2/2006 08:37

big buyer still there , dropped the price to get sells!
3 v 2

[nikesh2] 28/2/2006 08:23

yep
will be interesting today
has anyone got level 2
i just got it and just need to make sure i understand it
can some one help
thanks

[pinhead3] 28/2/2006 08:03

May well be a quieter day today on CRC after the late RNS on RPT.
It will be interesting see what volume goes through today.

[wassapper] 28/2/2006 07:14

nikesh - mostly oil at present and it has done me well! I switched in the autumn as I was fed up with the slow progress of small cap miners. I favour producers or near term producers. Ultimately I am seeking great value which is why I like CRC (production is not far off and cheap to do). Also WTI as a longer term bet. Greystar is my favourite gold only because I belive it has up to 20m ounces.

I have been folowing resources for five years so I suppose I have learned a little. One thing is "one drill result does not a mine make" and certainly not for about 10 years!!!

I don't hold but I think Griffin is a great story - producing and no debt.

[nikesh2] 27/2/2006 22:34

wassaper
which other stocks are in your portfolio if you dnt mind me asking
you seem to know your stuff on resource stocks