gil, in answer to your request...
Assume Indicated and Inferred equals Proven and Probable tonnage of +/- 871 M mts. mt.
871 M mts at 6.5 percent iron equals 56.6 M mts of pure iron. Assuming the iron is worth 80 dollars per ton, gross value insitu is about $4,500,000,000.
Assume here that the value for sale is around 5 percent of the insitu value, then it's worth about 226 million dollars.
Using 70 million shares, that's about $3.23 per share. However, the study only covers about 13 percent of the project surface area, and only to a depth of 30 metres. Some of the dunes are several hundred metres tall. Continuity in the test area has been shown to double the tested depth, suggesting another $3.23 per share in value. Call it 6 dollars per share.
For arguments sake, let's say this 6 dollars per share represents 20 percent of all that can be mined over the entire project area. If so, then the project may be worth 5 times that, or 30 dollars per share. Let's cut that in half, suggesting that the insitu value for sale is only about 2.5 percent of the value in the ground. We are still taking about 15 dollars per share, and without credits for titanium, vanadium, or other assets of the company.
I'm thinking that 12-15 dollars per share was in Luxor's mind when they paid up to US $3.50 per share last year.
Note: World Class gold deposits can sell for 10-15 percent of the value of ounces in the ground. However, the iron sands represents a different animal in terms of the amounts of material to be moved. That is, more units in production yield lower unit values. So, I am guesstimating here that 2.5 to 5 percent is warranted. It could be more or less.
For those who accuse me of being a blind cheerleader pumper, I am just playing with numbers here. I'm not selling then. However, I don't think anyone can argue that 15 dollars per share is outside the upper limit of potential value at this point.
What's the low end? You call it.
Note also that these numbers relate to a sale of the project, not what retail shareholders may bid for the stock before an offer is received.
VP in AZ
"It is unconvincing to say that retail investors do not follow iron sands / iron investments like other resource stocks, since a number of other iron junior stocks who have much less defined properties than CDU have doubled or tripled in the recent bull run with quite significant volumes attached to them."
O.k. I was only attempting an explanation. I don't know what the truth of the matter is.
"Please, note that I do not talk about my personal feelings here. I am talking about market normal reactions to exploration data."
Thanks for the clarification.
"The only way to increase value is to eliminate uncertainties; and the only way to eliminate uncertainties in this case would be more drilling and thorough feasibility study."
It's looking like the market agrees with you here, at least for the moment. However, I still maintain that a deal could be announced sooner than later. Such an event should push the share price higher, if nothing else will. So should receipt of the 88 million dollar bank guarantee.
In any case, I appreciate your perspectives. Thank you.
There is a big distance between market expectations about iron ore deposits and this board hype. Normally, iron ore deposits have metal contents in 60s%. It means that even PDP numbers are not quite traditional; they rely on sub-products to compete with other iron mines in economic terms. Reporting iron sands numbers with metal contents almost 10 times lower than in traditional deposits carries risk of misunderstanding and/or even negative market reaction. One should understand positives and uniqueness of iron sand deposits, but, unfortunately, company itself is still in the beginning of this road, i.e. feasibility study is specifically required for such unique deposit. In other words, market has reasons to apply about zero value to iron sands so far, even if it is in total dissonance to this board expectation.
Having read so much in depth analysis and speculations, one thing is for sure, this stock is a serious laggard. One can possibly explain the SP reaction yesterday attributing to limited drill area, but the pathetic volume is hardly justifiable...
It is unconvincing to say that retail investors do not follow iron sands / iron investments like other resource stocks, since a number of other iron junior stocks who have much less defined properties than CDU have doubled or tripled in the recent bull run with quite significant volumes attached to them.
Any announced number is applicable; i.e. if a company reports certain resource size then market will react based on this number. It means that iron sands reported size is currently taken into account while speculations about possible expansion will not be taken into account until they are confirmed by drilling results. Please, note that I do not talk about my personal feelings here. I am talking about market normal reactions to exploration data.
I already mentioned that 'ore' processing in iron sands will be likely less expensive than for traditional iron deposits. However, emotional arguments like you used, i.e. 'so much cheaper as to be virtually inconsequential' do not work on market. What actually working is greater discounts applied to values when market sees uncertainties, i.e. projections not supported yet by independent data/analysis. The only way to increase value is to eliminate uncertainties; and the only way to eliminate uncertainties in this case would be more drilling and thorough feasibility study.
"Verified (drilled) iron content is 6 times lower."
True enough, but not applicable. Lead time to production and development costs will be very substantially lower. That is, so much cheaper as to be virtually inconsequential by comparison to a property like Pampa de Pongo.
"...iron sands transaction is less feasible, and if it still happens, it would go with greater discount."
Why do you think this? All else being equal, would not a producer pay a premium to be in production, say, within 6-9 months as opposed to 5 years? Then, too, would not such a property also attract a premium for having dramatically lower development and operating costs?
"What's the low end? You call it."
In answering my own question, I'd go with half a percent of the value of ore in the ground/sand, bringing about $3.50 per share (with no consideration for other assets). However, Luxor appears to have paid as much as this last year in their share purchase program. While world economic conditions are different now, and iron prices are lower - though rising - I doubt that $3.50 per share will be enough to encourage them to vote for a sale of the company at this price.
Anyway, here's a potential range in values for those who care - US$3.50 to US$15.00 per share. Would something toward the middle be likely? We shall see. The kicker here will be what the melt tests show, and how much more than 80 dollars per tonne can be achieved, say, with pig iron production and sales.
Good grief VP, i think you mean well, but you have a stock that has been waiting for the SRK resource estimate and I'm sure by reading your posts you and other perma bull pumpers,(many with a "0" in there name??) thought the news was great and the stock would move higher, now you come up with what seems like a rational and logical estimate of what fair value would be for this stock.
You now estimate the low value of the stock is $3.50 and you have a stock that is currently trading at .96 which is lower than before the wonderful resource estimate
the market and price actions are telling you that your assumptions are wrong and logic is faulty. that's the reality..could this stock go higher sometime in the future? Yes, but it will not be based on anything you or any the other myopic permabulls keep spewing.
Sorry for being terse,I'm venting....and yes, I AM long, but pleased don't tell me this stock is with $15.00 a share before it can even prove it will not make new lows in cents not dollars.
There are two things making iron sands less attractive at this point than PdP:
1. Verified (drilled) iron content is 6 times lower.
2. Deposit is not traditional, i.e. it is less amenable to traditional iron resource economic estimates.
It means that iron sands transaction is less feasible, and if it still happens, it would go with greater discount.
warmcamp, "...thorough feasibility study only can make veritable judgment about iron sands value and Cardero is still few years off this study."
Correct. In the meantime, this does not preclude some sort of corporate transaction in the near term. By way of example, let's look at Pampa de Pongo. It sold not only without having had a feasibility study, it sold without having had a pre feasibility study. Instead, PdP sold two weeks from delivery of the preliminary economic assessment. Cardero is a lot closer to having a PEA than a feasibility study, and there is nothing to preclude a deal of some sort even now. However, I think the likelihood for such will go up after the results of the melt test are in.
VP, thank you very much.
As the SRK numbers were insanely strong, why didn't the stock move? (US and Canada combined volume was about 65k.)
Why didn't the company try to make a bigger splash? (They waited until 2 minutes before the open and undersold the story.)
Do they have a deal lined up?
gil, "why didn't the stock move?"
I don't pretend to know, but here are a few thoughts to try on for size. If iron explorations stocks had any following in the retail market, which is what most quickly moves stocks like this, it was lost with the crash late last year, and more so with the PdP debacle. I think retail investors are now quite skeptical regarding anything attractive to Chinese buyers. Couple that with the fact that no other buyers have step forward during the time PdD has remained available to other buyers. That opportunity, I think, does not expire until the property has been fully paid for.
Again, big money responds more slowly and deliberately to news such as we had today. In that regard, I think prices and volumes will improve over the coming days and weeks.
"Why didn't the company try to make a bigger splash?" I'm not sure I understand. If they made the announcement after the close yesterday, people would wonder why they didn't do it this morning. Besides, we only know what time the wire service made the release, not when they received it. At least the news didn't come on a Friday afternoon before a 3-day weekend.
By the way, Quentin tells me the so-called "typo" did not happen from their end. The PR to the wire service(s) said 60 metres not 6 metres.
"Do they have a deal lined up?" All anyone outside the company can know about that is what the company is willing to say. That is, there are several interested parties "lined up" who may be interested in making some kind of offer regarding PeT. If and when one will actually do so remains to be seen, though I'm confident that will happen. I'm not sure what more is needed at this point to generate an offer. Perhaps the melt test, perhaps not. I hope we don't have to wait for the pre feasibility study. While that would make more sense to buyers, or possible JV partners, it's is not necessarily a rule. Time will tell.