Cotton & Western Mining Inc. (CWRN)

[ImOnABoat]

CWRN $1 PPS in 2011

Starting January next year CWRN will be shipping via PanaMax one to two 75,000 DWT loads per months.
(www.marketwire.com/press-release/CWRN-Baja-Iron-Mining-Project-in-Full-Production-1349792.htm)

This means an average of 1.5 shipment a month. The number comes up to 18 shipped loads per year.

18 x 75,000 DWT = 1350000 DWT

According to www.mbironoreindex.com, iron prices keep rising and are currently at about $152/tonne.

1350000 DWT x $152/tonne = $205,200,000

This is our anticipated revenue for 2011, MORE THAN TWO HUNDRED MILLION DOLLARS!

According to the company's preliminary projections (www.marketwire.com/press-release/Cotton-Western-Mining-Inc-CWRN-12636000000-Revenues-Projected-on-first-2808000-Metric-975457.htm), their profit margin will be around 50% before tax. This is reasonable for high-margin, high-demand commodity like iron ore, but for the sake of being conservative, let's say it will be 40%.

$205,200,000 x 0.40% = $82,080,000

This is our anticipated earnings for 2011 before tax.

Now, the last update on the share structure was 2.3B OS, of which 2B were restricted shares, and the float was 300M. I assume the company could have converted some of the restricted shares into free-trading ones for the purposes of supporting this enormous project. Let's assume the worst case scenario that the entire 2.3B shares are free-trading.

Then our earnings per share can be calculated as follows:

$82,080,000 / 2.3B Shares = $0.036 per share.

Established companies with high shareholder confidence trade at 20x - 30x of their EPS. In CWRN's case, 10x should be reasonable, so a fair PPS under the anticipated conditions in 2011 is 36 cents per share.

***** 36 cents per share is what can conservatively be calculated considering the worst case scenario for the share structure, disregarding the fact the iron ore prices are rapidly rising, ignoring any expansion potential, and WITHOUT CONSIDERATION OF THE 60% BUYBACK. The reality is that CWRN trades as if the float was MUCH less than what I used in my calculations, and that the buyback will start as soon as the first revenues are in. Thus, all in all, $1 per share is something I would expect for the company with this much potential. It might seem like quite a leap from where we are now, but feel free to go over all the aforementioned math on your own, look at the millions of dollars worth of equipment on the production site, and then decide for yourself if this sort of risk/reward ratio is for you.

P.S. For those who like seeking out rare long-term plays in the pinky land, Baja 14 has 8 million DMT of ore (www.marketwire.com/press-release/CWRN-Cotton-Western-Mining-Inc-Projects-Additional-One-Million-Metric-Tons-Usable-Iron-984505.htm), with an additonal million discovered just recently (www.marketwire.com/press-release/CWRN-Additional-10000000000-in-New-Baja-14-Iron-Found-1291865.htm). Those deposits alone will keep CWRN busy for nearly a decade. For a complete list of the company's iron mines see: www.cottonwestern.com/iron_mines.php.

Good Luck to All!

i.t.m.d.