Thanks Glorieux,
I was looking for a particular piece about how NOT's and FWR's Chrome was similar due to high grade comparisons and lengths and the fact that NOT has better secondary Chrome % although notably less of it.... Anyhow. I was attempting to put together #'s based as much on reports and information from both companies as possible and put together a sound comparison for both companies, but at this point I'm still looking at numbers and its basically too late in the evening, so perhaps tomorrow or some other time this week...
There was one thing I wanted to mention, and again its late so bare with me. Plus its been a while since I last attempted Net Present Value (NPV) calculations so I'm likely to be a bit off and perhaps there are others out there more experienced with NPV's than I....
FWR NPV
Using Glorieux 30-50 Billion dollar estimate of potential value, let's say it is the profit FWR could realize. I also read that perhaps the chrome would be mined over a 75 year time frame?? Well I'll use 50 Billion over 50 years to make the numbers easier. Since FWR would not receive this 50B upfront, let's say 1 billion in profit from activities annually over the 50 year life of the mine. The NPV using 8% discount rate would provide a NPV of 12.32 Billion.
NOT NPV
Now Not, with its nickel at Eagle 1, the inferred tonnage of 1A was 1,087,000 at $1500/tonne or just more than 1.5 Billion. (this is from NOT's presentation Oct 2009) If they expect a triple at Eagle1 alone (not including any other known Ni resource), this would be above 4.5 Billion. So let's say the Nickel is 5 Billion dollar estimate and lets say it is mined over 5 years ( I understand that there is possibly more nickel and the mine life may be longer, again its late...). The NPV using 8% discount rate would provide 4.26 Billion.
Now for NOT's Chrome. People have stated that the Chrome is far less than FWR's tonnage and less quality. I don't have numbers to draw on so I'll use half the tonnage at less grade or profit, say 25 years at 700M per year (again could be more or less...). At first this would be seem to be a value of 17.5 Billion (versus FWR's 50 B). However the NPV of this chrome using the 8% discount rate would be around 7.66 Billion.
Therefore NOT's NPV with these example amounts and values of Ni and Chrome would be a total of 11.92 Billion (similar to FWR despite FWR's large and higher grade Chrome deposit)
So despite the idea that there may be 50 Billion profit to be made over the life of a mine, its value in today's dollars would amount to about 12.32 Billion. Not to say either way whether or not NOT's offer for FWR is appropriate or not, because let's face it folks these companies are in a much better position to know what they are worth than I am. I'm simply saying that any takeover discussions between NOT and FWR or Cliffs needs to consider the current value of the minerals in the ground not the overall value that will inevitably be discounted over the years
**Now if someone could provide more accurate #'s I could try this again... and just to clarify, the discount rate, tied to inflation and interest rates will fluctuate and may not be as high as 8% or could be higher and this would have a significant impact on NPV's.**
As for the merger/takeover, I would like to see these two combined at an appropriate valuation. But until I know what the offer is its a waste of my time to bicker over the details. I will be very interested in discussing the details of the offer after I see them.
I appreciate those that have maintained calm composure recently and have continued to contribute to the benefit of others like myself.
GLTA, sorry for the rambling...
pymmer
