Enumerate
25-04-2008, 07:27 AM
Here is a copy of post I made on an Australian investment forum. The new generation of model for metal resources has some extremely interesting twists .. see for yourself:
Here is a very interesting link describing a new generation of price forecast models from Bloomsbury Minerals Economics:
http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=43894&sn=Detail
The long and the short of it:
- the Macquarie "return to mean" PoZ/PoPb forecast is "first order". More detailed models predict a much high long term price based
- this higher long term price is based on evidence of a new "regime" of stock to price correlation
Further, BME describe base metal prices being driven by 5 basic factors. Significantly, the old view of "Industrial Production" as a driver of price is, in fact, relatively insignificant. The emergence of stock going into exchange traded funds is the single key factor driving elevated base metals prices.
For INL investors this is very good news.
- We can expect Zn to maintain value above 90cents (feasibility study price)
- We can expect Pb to increase in price (and become the dominant "growth" value in Hellyer concentrate)
- We can expect these prices over the full economic life of Hellyer concentrate
- We can expect the residues project to complement Hellyer concentrate production and extend the "life of mine" into the long term
The Macquarie model put 15cents per share on the Hellyer concentrate project based on 1 year profitability falling to break even in subsequent years leading to unprofitable in the medium term. Advanced modelling indicates that this could be quite wrong.
If the value of HZCP is 15cents year 1 and 10cents years 2 to 8 with HZRP coming in years 3 to long term at 10cents, say ... with Zeehan slags and BSM ore coming in at another 10 cents per share years 5 to long term.
Consider that we have to put in 20cents a share, this year, to finance the HZRP ...
Using a 17% discount rate, as a return capital ... I calculate that the "value" of these income streams should make INL.ASX worth about 88cents per share - right now!
This is simply the application of the current generation base metals forecast and the correction of the Macquarie forecast methodology!!
Here is a very interesting link describing a new generation of price forecast models from Bloomsbury Minerals Economics:
http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=43894&sn=Detail
The long and the short of it:
- the Macquarie "return to mean" PoZ/PoPb forecast is "first order". More detailed models predict a much high long term price based
- this higher long term price is based on evidence of a new "regime" of stock to price correlation
Further, BME describe base metal prices being driven by 5 basic factors. Significantly, the old view of "Industrial Production" as a driver of price is, in fact, relatively insignificant. The emergence of stock going into exchange traded funds is the single key factor driving elevated base metals prices.
For INL investors this is very good news.
- We can expect Zn to maintain value above 90cents (feasibility study price)
- We can expect Pb to increase in price (and become the dominant "growth" value in Hellyer concentrate)
- We can expect these prices over the full economic life of Hellyer concentrate
- We can expect the residues project to complement Hellyer concentrate production and extend the "life of mine" into the long term
The Macquarie model put 15cents per share on the Hellyer concentrate project based on 1 year profitability falling to break even in subsequent years leading to unprofitable in the medium term. Advanced modelling indicates that this could be quite wrong.
If the value of HZCP is 15cents year 1 and 10cents years 2 to 8 with HZRP coming in years 3 to long term at 10cents, say ... with Zeehan slags and BSM ore coming in at another 10 cents per share years 5 to long term.
Consider that we have to put in 20cents a share, this year, to finance the HZRP ...
Using a 17% discount rate, as a return capital ... I calculate that the "value" of these income streams should make INL.ASX worth about 88cents per share - right now!
This is simply the application of the current generation base metals forecast and the correction of the Macquarie forecast methodology!!