RCH richfield group limited

some more comparison numbers

  1. 1,057 Posts.

    It is interesting to compare Moly Metals projected Average EBITDA of $A265M with my numbers for RCH's (I'm using a BFS for a 7.2Mt p.a. mill).

    Now Moly Metals gets the benefit of Moly prices projected to slide from $34lb to $15lb as at 2013 then is projected to stay at $US15lb thereafter so its getting that 34 to 15 range over say 5 years. I on the other hand have assumed only $US15lb for the life of RCHs project.

    I've adjusted the 0.14%MOS2 average grade upwards by 33% in line with the claims by the company that it is the error factor in the assay grades. Therefore the 0.14% MOS2 grade becomes 0.19%MOS2 which then converts to 0.1596% MO.

    Now Moly Metals is a 15Mt pa mill but I've assumed a smaller 7.2Mt pa mill for RCH which doesn't need the same economies due to its higher grade.

    Whats the verdict for RCH? An EBITDA average of $A253M over 10 years.

    So for half the capex(RCH $500M V Moly Metals $1.1Billion) their EBITDA are almost the same. If I had given RCH some of that high price MO up until 2013 it would have smoked Moly Metals and thats not taking anything away from Moly Metals which is a top operation.

    Conclusion: Grade beats everything else on every occassion. Moly Metals advantage is mine life (until they grow the size of RCH's resource which is almost a certainty) and sovereign risk (can't beat doing business in Australia I'm afraid).

    We are in this very early, way ahead of the pack and as such have to put up with lack of interest until something clicks in the market. This baby will have fits and starts and then one day it will just go where it belongs.

    Interesting, if my hunch is right, RCH is going for a JV partner early whereas Moly Metals tended to want to keep their options open by doing the BFS. Its also probably true that if you are going to mine 0.06%MO your backers are going to want to see a BFS before stepping up in any fashion. RCH's grade gives them that marketing advantage.

    The best position to be in, is not as a shareholder of RCH but as a 50% JV partner. You would make a killing, a huge return on capital. Us punters have to be satisfied with a simple shareholding
 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.