>What I would like to see here from the experts is a nice formula on how to calculate the price per share of this stock base on all the available info today (step by step),
Ed, normally with a co. that's already in production, you look at things like earnings per share (EPS) and various ways of reckoning cashflow, etc., and then get a sense of what would be a fair valuation of Price to earnings (P/E) or price to CF. Obviously, growth stocks (growing their earnings) tend to be given much higher valuations (e.g., P/Es) than value stocks.
With non-producing juniors, you have to project all these things one or more years into the future, depending on how close to production they've come. For us with AMY, we're projecting essentially for what AMY will have after 1 yr of full production (beginning 2nd half 2014?). Given the base case scenario that AMY presents in their online slideshow, in their first year they will be processing some 3,500 tonnes of ore per day, yielding about 140 tonnes of EMM per day. Note that AMY's slideshow and spoken comments by CEO Larry and Norm Tribe QP (the drilling subcontractor who went on record in a video last Spring to say that, in 50 years of assessing properties, he's never seen one with as much profit potential as AMY)-- all speak of AMY being able to eventually expand to 10k to 20k to 30k tpd given what appears to be a huge market-demand for AMY's value-added products (EMM and EMD, the latter, as we've discussed, capable of being turned into LMD for the Lith-Mn battery market).
There are a lot of variables when you start making financial projections, as Dan and I have occasionally discussed on this board since last April.
For instance, i very conservatively use a 3% Mn grade, but AMY will surely begin mining their higher grade deposits, which is why their slideshow financial projection shows 4.45% Mn grade in their base case and expanded production scenarios.
You've just recently read on this board how we're not sure what the EMM / EMD production mix would look like for AMY. I'm very conservative on this one, assuming most of the production will be the less profitable EMM with the more profitable EMD in the minority. But if it's anywhere near 50/50, as Kemetco's electrowinning process evidently entails, and if that EMD is used to make LMD for the battery market at ballpark $6/lb gross profits (after production costs of a few bucks, estimates Larry), then AMY's profitability SOARS once they're in production.
We also have no way of knowing what will be the f.d. (fully diluted) sharecount by the time AMY is in production. Presently it's just over 141M (including 36M in warrants and options); maybe some of the warrants/options won't get exercised and so that count will diminish a bit, but i think we all know that AMY will dilute further to raise funds-- that's standard procedure for almost every junior non-producer, so it's a "necessary evil" for these young publicly-traded companies. We all hope that AMY will be able to raise funds at a decently high shareprice, like the PP done last year at 70 cents.
Now that AMY is up from that ridiculously oversold low of 30 cents due to the dumping of all juniors and then (add insult to injury) year-end tax-loss selling, i think we're all breathing much easier about AMY's not having to raise funds and dilute shares at 30 cents/share!! Larry has told some shareholders that he does not want to have to raise funds at anything less than $1/share-- and, after all, he's our biggest fellow shareholder that we know about.
You wanted a step-by-step formula for estimating AMY's price-- and again i assume you mean future price once they're in production. Here below is a model i've used-- and keep in mind how any of the variables can change and also note my conservative figures on some variables (like Mn grade), though i'm estimating a U.S. price of EMM at $2 based on CPM Group report, which i think is also conservative, but obviously about 15% higher than present USA price for EMM. For all we know, EMM could be selling at $3/lb by 2014 given all the China talk about EMM production cutbacks. If they enact export QUOTAS like they did with REEs etc., then EMM price could explode much higher.
Here are calculations I used in Fall 2011 to get EPS figures, based on AMY’s “base case” scenario of 3,500 tonnes/day at low grade (only 82M lbs, not Larry’s 110M lbs of EMM/yr):
Assuming 3.5k tonnes/day ore throughput at 3% grade manganese (not 3.5% or 4.5% grade):
3,500 x 0.03 grade = 105 tonnes of manganese
Multiply by 2204.6 to convert from tonnes to pounds = 231,483 lbs manganese/day
Multiply by 355 production days (conservatively assume 10 days no production) = 82.17M lbs EMM/yr (CEO Larry repeatedly uses a higher figure of 110M lbs of EMM/yr, based on mining the higher-grade desposits first [avg 4.45% as per slideshow], but I’ll stay very conservative here at just 3%)
Assume 20M lbs/yr of that amount will actually go, not to EMM, but to EMD production (see further below on EMD/LMD).
Multiply (rounded off) 62M lbs EMM by approx $1.40 gross profit/lb on EMM = $87M gross profits on EMM (assuming AMY’s costs to be, say, $0.60/lb and just a $2/lb price for EMM in USA in 2014 given 14% import duty & China 20% export duty, and only a slight EMM price increase from today’s $1.85, e.g., simply due to less Chinese smuggling)
Add $150M in gross profits on production of 25M lbs/yr of LMD (requiring c.20M lbs of EMD plus c.5M lbs of lithium) at $6/lb gross profit for the LMD (CEO Larry Reaugh’s conservative figure given to Doug Hadfield in Resource Intelligence interview in Summer 2011)
Total gross profits = $237M
Multiply by 75% to account for, say, 25% royalty agreement with a Joint Venture partner (in exchange for full funding into production) = $178M
Multiply by 66% to account for circa 34% in taxes, SG&A overhead, etc. = $117M net income (however, Danduedil thinks AMY’s costs would be far lower due to big tax breaks for Arizona corporations, and other breaks, so likely closer to about $150-$160M in net income)
Divide by, say, 160M shares fully diluted = 0.73 EPS (much higher if we take Dan’s net income)
Apply suitable 12-15 or even more generous P/E for AMY's 100+ year mine life....
(assuming by 2014 much more of the property has been explored/drilled and Indicated Category is by that point at least 30-40 billion lbs of Mn)
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Here are calculations I used in Fall 2011 to get EPS figures using two expanded production scenarios:
Case #1:
Assuming 10k tonnes/day ore throughput at 3% grade manganese (not 3.5% or 4% grade):
10,000 x 0.03 = 300 tonnes of manganese
Multiply by 2204.6 to convert from tonnes to pounds = 661,380 lbs manganese/day
Multiply by 355 production days (conservatively assume 10 days no production) = 234.8M lbs EMM/yr
Assume 20M lbs/yr of that amount will actually go, not to EMM, but to EMD production.
Multiply (rounded off) 215M lbs EMM by approx $1.40 gross profit/lb on EMM = $301M gross profits on EMM (assuming AMY’s costs to be, say, $0.60/lb and just a $2/lb price for EMM in USA given 14% import duty & China 20% export duty, and slight EMM price increase from today’s $1.85, e.g., simply due to less Chinese smuggling)
Add $150M in gross profits on an extra production of 25M lbs/yr of LMD (requiring c.20M lbs of EMD) at $6/lb gross profit for the LMD (CEO Larry Reaugh’s figure given to Doug Hadfield in Resource Intelligence interview)
Total gross profits = $451M
Multiply by 75% to account for, say, 25% royalty agreement with a Joint Venture partner (in exchange for full funding into production) = $338M
Multiply by 66% to account for roughly 34% in taxes, overhead costs, etc. = $223M net income (again, Danduedil thinks such costs will be much lower due to tax breaks, write-offs, etc.)
Divide by, say, 160M shares fully diluted = 1.40 EPS
Apply suitable generous P/E for AMY's 100+ year mine life....
Case #2:
Assuming 20k tonnes/day ore throughput at 3% grade manganese:
20,000 x 0.03 = 600 tonnes of manganese
Multiply by 2204.6 to convert from tonnes to pounds = 1,322,760 lbs manganese/day
Multiply by 355 production days (conservatively assume 10 days no production) = 469.5M lbs/yr EMM
Assume just 20M lbs/yr of that amount will actually go, not to EMM, but to EMD production.
Multiply 449.5M lbs EMM by $1.40 gross profit/lb on EMM = $629M gross profits on EMM (assuming AMY’s costs to be, say, $0.60/lb and a $2/lb price for EMM in USA)
Add $150M in gross profits on extra production of 25M lbs/yr of LMD (requiring c.20M lbs of EMD) at at $6/lb gross profit for the LMD (CEO Larry Reaugh’s figure given to Doug Hadfield in Resource Intelligence interview)
Total gross profits = $779M
Multiply by 75% to account for, say, 25% royalty agreement with a Joint Venture partner (in exchange for full funding into production) = $584M
Multiply by 66% to account for roughly 34% in taxes, overhead costs, etc. = $385M net income
(again, Danduedil thinks such costs will be much lower due to tax breaks, write-offs, etc.)
Divide by 160M shares fully diluted = 2.41 EPS
Obviously, these EPS figures will be higher if:
1) EMM and/or LMD are selling at higher market prices on higher demand and/or predicted severe supply cutbacks by Chinese producers and less Chinese smuggling out of Vietnam;
2) more LMD production by AMY occurs (say, 50M lbs/yr instead of my figure: 25M lbs/yr) (i.e., circa 40M lbs of EMD to add to lithium to get 50M lbs of LMD);
3) AMY generates meaningful sales of anhydrous sodium sulphide crystal (for laboratories and whatever other markets)
4) AMY generates meaningful sales of strontium
5) an agreement with a JV partner is settled at only 15% or 20%, not 25%, share of royalties.
P.S.-- And note that in my scenario scenario of a 25% JV agreement, the JV partner gets fully paid back their investment in funding AMY's startup in just around one year (!!!) and after that AMY’s JV partner gets clear profits of $120M/yr in the 10k tpd mining operation and nearly $200M/yr in the 20k tpd scenario.
