Van Dieman Mines Share Discussion Threads

[wassapper] 16/10/2007 18:04

The Fox-Davies note of 1 Oct may help the revenue and valuation debate.



Base case 21p
Upside case 39p
Blue sky case 49p

But you have to accept their assumptions!

[vanbrussel] 16/10/2007 17:44

Chipperfrd,

In the 2004 Report Ambrian mentioned:
- a 4% Government Royalty
- total cost of 1 tonne tin metal = A$ 10,718 (= US$ 9,491 as for today)

[chipperfrd] 16/10/2007 17:23

Daz

I assume lower tin production of 700t in 2008 rising to 1200t in 2009.
Using tin price of $15k/t gives sales of $10.5m in 2008.

I assume sapphire production of 1.5m carats in 2008 rising to 3m in 2009.
If sales of rough & cut are split equally then sales of rough (@ $3.2/c) = $2.4m.

Assuming cut stones are 60% after treatment and price is $35/c then gross revenue would be $15.7m but this is subject to US tax of 20% and the JV slit of 50% attrib to VDM - leaving net revenue from cut stones at $6.3m.


Hence my estimate of total revenue for 2008 of $19.2m which is subject to a 2% royalty.

For production costs I am using $8,000/t, = $5.6m for 2008.

I have probably been too optimistic re G&A so will take your suggestion and up it from $0.5m to $1m.

Arrive at EBIT of $12.2m in 2008 and $24m in 2009.
Less interest at 12.5% and tax at $0 (I still think around 18 months of allowable offsets).

So possible net earnings of $9.7m (08), $13.1m (09), $14.8m (10) but these are for Scotia only without allowance for Endurance.

Chip

[vanbrussel] 16/10/2007 16:29

LOL Jonwig. Tell me, there won't be any foreclosure, will there?
Management is that old they don't have the energy to spent money other than on delays

[daz] 16/10/2007 16:26

Chip

Interesting to see to other peoples estimates.

FWIW, I had revenues slightly higher - about $20.3m for 2008, rising to $30m in 2009, if they reach the intended target of 1350 tons of tin per annum.
My direct costs though are much higher at $7.4m for 2008, perhaps because I've been too conservative on the tin costs, revenue cost similar at 0.34m and central costs, should be at least £1m if you multiply the interim admin expenses * 2.

Agree though there is scope to pay down the debt early, on the assumption that have not ear-marked cash flow, or at least not much cash flow as part of their finance plans.

J :)

[jonwig] 16/10/2007 15:34

Yes, all, we don't know the exact way the debt works.
But partial repayment or not, we seem (in mortgage terms) to be a sub-prime-mine.

[chipperfrd] 16/10/2007 13:09

IMO a lot depends on the ratio of rough to cut sapphire sales.

I get Scotia revenues of around $19m in 2008 if rough/cut works out at 50:50 and tin maintains current levels.

After royalty ($0.4m), Cash costs ($5.6m), and G&A of say $0.5m their EBT would be around $12.7m.

Assuming total drawdown of the US$20m facility their annual interest would be around $2.5m and tax should not be payable until mid 2009.

So 2008 earnings could be close to $10m with $13m in 2009, so a significant chunk of the drawdown could be paid early although sufficient cash must be available for Endurance start-up.

Guess we will have to wait for actual financial results before seeing the true picture, but still looks very viable to me.
Chip

[daz] 16/10/2007 12:09

J - I'm sure VB's figures include capital repayment in the monthly interest figure, so interest tapers off towards the end of the loan.

[vanbrussel] 16/10/2007 12:09

Maturity is the date the borrower must pay back the money he or she borrowed
So they won't pay back the principal amount on that date but before

[jonwig] 16/10/2007 11:44

VB ... surely, 12.65% of £6.6m = £0.8349m pa. Over 5 years, they will pay (simple) interest of £ 4.1745m.
So a total of £10.8m.
OUCH!!

KL - dunno. But I have an overdraft facility of £1,000 with my bank at about 12%. I've never used it, and I do hope they don't decide to charge me interest until/unless I do.
It may not be like that, of course, for VDM.

[daz] 16/10/2007 11:40

KL

As initial production from Endurance is targetted for 1st Nov and the company have only ear-marked the debt for Scotia and Endurance. I believe they will know how much debt they will require by that date. The interest rate will then apply on the amount borrowed.

It suggests that further projects (Northern Plains etc) can be financed internally from cash flow.

VB interesting calculation, perhaps I was being too harsh. Maybe the quid pro quo for the punitive interest rate is also that the company believe can pay back the capital at an earlier date if they choose.

I think we've got to hope that tin prices remain strong for 2008, as any additional cash flow from higher prices can be used instead of debt.

[vanbrussel] 16/10/2007 11:02

Not my piece of cake, but
If you have to repay £6.6m at 12.65% for 60 months from day 1 onwards
Then total amount = £146,720 x 60 = £8,803,200
£8.8 / 6.6 = 1.33
Not to bad taken the share-price has more potential than 33%
*That's right Daz: £146,720 is the capital-repayment and interest together

[katylied] 16/10/2007 10:55

Could someone translate this into plain english...

...Drawdown of the debt facility is available until 31 October 2008.
The rate of interest of the facility will be the 90 day Bank Bill Rate + 5.75
per cent. per annum and the facility will mature on 31 October 2012...

Does VDM pay interest on the 'drawdown' or the whole 'facility'?
Does the 'drawdown' deadline of 31/10/2008 means that the
'Endurance' project needs to be well underway by then
or funds must be drawndown (and interest paid)
in advance of the actual capital needs?

I'm assuming facility+placing is all far too much
money for just the Scotia project alone...

[daz] 16/10/2007 09:27

Terms of the bank loan are included in todays announcement, 90 bill rate (currently 6.9%) + 5.75 per annum, gives an annual interest rate bill of 12.65, way over the top, when companies over here borrow at LIBOR + 1 or 2%.

A big chunk of shareholder profits is now going to be paid to the bank instead

[eggbird] 16/10/2007 09:17

RNS Number:7688F
Van Dieman Mines plc
16 October 2007

VAN DIEMAN MINES PLC

VDM Completes Equity and Debt Funding For Scotia Project

* #5.5milion equity fund raising in place
* A$15.4 (#6.6) million debt funding package finalized
* Funding complete: allows Scotia production to commence by year-end 2007

16 October 2007: Van Dieman Mines plc ("Van Dieman" or "the Company"), the AIM
listed mining company which is developing its 100% owned tin and sapphire mines
in Tasmania, announces that it has successfully raised in total #5.5 million
before expenses in an equity fundraising conducted by Fox-Davies Capital.
Following the initial announcement made by the Company on 27 September, this now
completes the equity fundraising.

The #5.5 million equity fundraising will result in the Company issuing a total
of 55.7 million ordinary shares in the Company ("Ordinary Shares") and was made
up of two components. The Company has placed 45 million Ordinary Shares raising
#4.5 million at a placing price of 10p per Ordinary Share (the "Placing"). In
addition, the Company previously announced on 27 September 2007 it had issued a
loan note instrument that raised #1 million. The loan note instrument converted
automatically into 10 million Ordinary Shares following approval of resolutions
put to shareholders at the Extraordinary General Meeting that was held on 9
October 2007 ("EGM").

Conditional upon the Company paying initial deposits of A$3,666,508, the Company
has also successfully completed debt funding arrangements with an Australian
financial institution for A$15.4 million (approximately #6.6 million). It is
intended that the Company shall pay such deposits on receipt of the monies
payable pursuant to the Placing, being no later than 26 October 2007. These
initial deposits are flexible and will be available to the Company on completion
of certain milestones. The combined equity fundraising and the debt funding
package are to be used to fund plant and equipment for both the Scotia and
Endurance Mines that will allow production at the Scotia mine to commence around
year-end 2007. Drawdown of the debt facility is available until 31 October 2008.
The rate of interest of the facility will be the 90 day Bank Bill Rate + 5.75
per cent. per annum and the facility will mature on 31 October 2012.

Clive Trist, Managing Director, Van Dieman, commented:

"The #5.5m equity fundraising by Fox-Davies Capital and the debt funding package
will provide the funding required to bring the Scotia Project into production
around year end 2007. Once in production, and given high tin prices and the
strength of the sapphire market, we expect to generate positive cash-flow during
2008."

We are grateful for the vote of confidence we received from our existing
shareholders in the equity fund raising and the additional support from new
investors and private client investors."



No market reaction yet, any thoughts folks??
I like ths bit, just hope they stick to it!!

"The #5.5m equity fundraising by Fox-Davies Capital and the debt funding package
will provide the funding required to bring the Scotia Project into production
around year end 2007. Once in production, and given high tin prices and the
strength of the sapphire market, we expect to generate positive cash-flow during
2008."

[daz] 12/10/2007 16:42

Some interest being shown towards the close, I think there might be a bit of stock from the placing, which might hold this back short term though.

As an aside, the management did say yesterday that they were optimistic that they would not get the same delays for the Endurance permits.

The permit guidelines will be the same - they were changed during the Scotia application and they would be meeting with council representatives I think Clive said in February to identify what issues and concerns they had so that they could be dealt with ahead of time, they certainly gave the impression they would be much more proactive this time round.

[aim_trader] 12/10/2007 12:44

The presentation was very interesting, granted VDM could have been a bit livelier, but some people are just not natural presenters.

The risk/reward is now very appealing on this stock.

[m5artin] 12/10/2007 12:15

Thanks jonwig, do you know of any updated broker's estimates on future earnings?

[jonwig] 12/10/2007 12:03

This is the Proactive event presentation.
I think it's the same as the one given at the AGM. (Page 16 updated for shares and holdings, though).
I personally found it quite interesting.

[jonwig] 12/10/2007 08:50

A poster on TMF was at the VDM presentation (Proactive Invs) and found it a little on the dull side:



There were two presentations at the AGM. I found one excellent (aimed at investors), the other so-so (more for industry insiders).

What I found bizarre about the report on the EGM was the way Non-Execs could be appointed without meeting the Executive team (who own nearly 40% of the stock between them).
Or maybe they had already met ... in a video conference?
In my view, the main failing lies with the ex-Chairman, MS, for sitting in London and doing not much except drawing his fees.
The three executives must have had every expectation that he would deal with the London side of things.

[nigthepig] 11/10/2007 18:37

PapalPower, thanks for posting the write up from 'Colin'.
A very comprehensive read.

[vanbrussel] 11/10/2007 16:49

Thanks again PP. Great read

[katylied] 11/10/2007 15:52

Thanks PP. After such a horrendus dilution, a blood sacrifice (Spriggs) was IMO, entirely in order. And if the new non-execs have indeed been imposed on the board by the large shareholders, then that is all to the good. Feeling a lttle happier about this investment, but now want some news of production in the past (as opposed to the usual future) tense...

[papalpower] 11/10/2007 13:55

Excellent write up by Colin over at TMF :




.