I attended the conference and saw the IDM presentation. Very pleased.
There are a couple of points worth adding that I found interesting?
The marketing. The Spherichrome product they have is a globally unique product that sits well above generic Chromite and just below zircon. Phil was s clear that it was a replacement for zircon in some circumstances or could be blended with other materials to improve the quality or reduce costs.
Importantly there is no official trading market for the product. It is more useful to view Spherichrome as a product rather than a commodity. Sure you can use the commoditised price of South African Chromite and Zircon as a reference but it is a product, it requires marketing. Phil spoke about the importance of their marketing partners (detailed on slides 25 and 26 of the presentation). These are globally the best people to have in your corner. Literally hundreds of years of collective experience in supplying product foundries. He even mentioned they were talking to Daimler about casting engine blocks using IDM product.
The graph on page 25 shows how successful their marketing has been. Selling to or above your forward 12 month production for a new product is pretty impressive. Once the Spherichrome gets a decent hold in the market, I could see price and demand moving up.
RBS Morgans had some research there at their stand for the company. It was initial research with a price target of 36 cents. I read through the research pretty closely and the numbers were all initial only. The data they used to value the company is well out of date. RBS used the figures published by IDM in the Feb 2010 presentation (70,000t chromite etc.) and importantly gave a mine life of only 8 years with the bulk of the valuation came from the value if the resource in the ground.
As Peppie highlighted and can be seen in the presentation, the mine output figures have all been revised upwards, product pricing has moved up dramatically and the targeted mine life is stated as 30 years.
The 36 cent valuation will be easily surpassed based on updated production and mine life figures let alone better pricing we are currently getting for a portion of production
The final point. There are other legs of growth to come. He reiterated the other products - Kyanite, Staurolite and Epidote ? were being worked on in terms of processing and finding markets.
IDM Price at posting:
27.8¢ Sentiment: LT Buy Disclosure: Held
