Pinky,
You raise a very good question here, but I think the simple answer to your question is, yes.
A few comments here:
1) I think the analysis conducted in the Tronox Valuation Letter posted on the bulletin board makes one of the best company valuations I have seen to date with the most reasonable assumptions. When the shares take a hit like they have recently, I often go back and read that letter to justify my reason for staying in this for the long run.
2) I have now owned Tronox shares for well over two years, like others on this board. I started buying long before the actual bankruptcy filing as I have long believed in the value of Tronox after bankruptcy. I even have some shares that were purchased at around $5.00/share!!! So, you can imagine how I was buying when the price went into the pennies per share range months ago.
3) I refuse to get overly alarmed here now that the share prices have fallen back to around 60 cents per share. This is just rediculous, especially when we are so close to having some news break within the coming several weeks. My only concern is that somebody knows something that we don't about the details of the restructure that is causing some panic selling. But with gold hitting new highs, it suggests there is just too much fear in the markets these days for some to hang in there for the long term.
4) In addition to an extrapolation of EBITDA from the MOR to the unconsolidated capacity of Botlek and Tiwest, I always use Kronos (KRO) as a guide to what the value of Tronox should be and what direction the share price should be moving. This is the most sound indicator of direction. Kronos is now holding at over $18/share, but Tronox has a better global footprint than Kronos and most likely, just as good if not better production cost position as Kronos after BKK.
5) When extrapolating EBITDA for Botlek and Kwinana (Tiwest), I would use 50% of the effective plant capacity of Kwinana which is around 110,000 metric tonnes per year of production, so, only use 55,000 metric tonnes to represent the Tronox 50% share in the Tiwest venture. The expansion (40,000 tonnes) at Kwinana is coming on line, however, Tronox has no income stream from that since that revenue at this time all goes to Exxaro, the other Tiwest partner. For Botlek, that plant capacity is only around 90,000 tonnes per year, however, for EBITDA extrapolation, I would assume effectively 85,000 metric tonnes. Remember also that Hamilton in the US is the largest capacity asset in the Tronox portfolio with a capacity of 230,000 tonnes per year, but for analysis, I would use an effective capacity of around 215,000 metric tonnes per year.
6) When you do all the math, I think you could add up to an additional 65% of EBIDTA from the MOR to the company associated with contribution from Botlek and Kwinana ((55,000 + 85,000)/215,000)= 65%.
7) The other factors that impact an EBIDTA analysis will be currency exchange rates of the euro and Australian dollar against the US$. This is actually helping the margins for Kwinana. For the euro and Botlek, it is probably neutral since the tonnes are produced and sold in euros, however, the conversion back to US$ will take a hit due to the weak euro.
8) The Botlek and Kwinana EBIDTA contributions may be even higher than that from Hamilton in the US since the offshore entities are not getting hit with all the restructuring and other charges that we see on the MOR. Also, there is some EBIDTA contribution from the electrolytic chemicals business in the MOR that may need some small adjustment for.
9) Selling prices have risen much higher and much faster in the Asia Pacific markets which will make the EBIDTA contribution from Kwinana on a per metric tonne basis look even better than Hamilton and Botlek. Prices have lagged in Europe and the US, however, they are now starting to move upward sharply, so forward EBITDA is going to be even higher from all the assets!
10) I refuse to sell my shares and I am convinced that by September, the share price will be much closer to $4.00 per share than today's price of 60 cents per share. This sell-off in recent days is absolutely rediculous. I have total confidence that the Equity Committee is working hard to protect the rights of all of us shareholders. The reality of the situation is that Tronox should soon be trading at over $10 per share unless something goes terribly wrong and the bond holders take an unfair excess of the company upon the restructure.
