Quiet night on TV so I have had a look at the most recent...

Quiet night on TV so I have had a look at the most recent smelter presentation - along with the most recent 3B report to confirm option existence. We can pull the following facts based on company data:

On a fully diluted basis, as of today, there would be 2.086Bil shares on issue if all outstanding options get exercised
Stated net operating margin of USD270 as at the date of the presentation

So, how can we justify a share price of $0.05 going forward with these numbers knowing that they need to raise approx $10Mil to get the 1st smelter going?

We have to assume a realistic price for a raising so I am going to take it as $0.02 - being a premium to the last raising - ergo 500mil shares to be issued to raise the needed $10Mil with, I am assuming, a further 250mil options thrown in for free. That means that with all of the new shares along with all of the options there would then be a total of 2.836bil shares knocking around.

So, a share price of $0.05 based on 2.836bil shares would see a market cap of $142mil. Put it on a fair multiple of 6x and we need to see net profit of $24mil to justify the price. Assuming their net operating margins are as stated (open to debate I accept) then they would need to be producing 65K tonnes pa - or roughly 3.5 smelters worth.

If you feel that the multiple is too low then you can clearly manipulate the market cap valuation higher but at least this way the mathematics are very simple. Funnily enough the level that they can do the CR at now doesn't really affect the long term valuation of the company - just how the share price will react in the very short term.

I thoroughly enjoy the debate on this thread and this exercise is just an attempt to strip out all emotion from the discussion and to look at the cold hard numbers. I suppose I also need to say that these are purely my views and that we should all do our own research.