Arafura Resources

[blues]

This sleeping giant looks like its about to wake up. If this breaks $1 i will definately be jumping on board, as my numbers make this out to be a $10 share after 3 years of production. :)

[corporateraider]

Is there a ramp up period?

[shasta]

Is there a ramp up period?

I'd say the "ramping" has started already...:D

Would be keen to see the figures/valuation that justifies a $10 share price!

[STRAT]

I'd say the "ramping" has started already...:D
LOL right between the eyes.
Remind me never to get on the wrong side of you Shasta when you have a gun in your hand :D

Actually the chart looks pretty good. One could say its ramping up :eek:

[shasta]

LOL right between the eyes.
Remind me never to get on the wrong side of you Shasta when you have a gun in your hand :D

Being a straight shooter i'd only need 1 bullet :D

Ok, let's run with Blue on this & see what needs to actually happen to get a $10 share price (without share consolidations, thats just cheating!)

ARU is currently @ 70c (Market Cap ~ $135m), so lets say ~200m shares on issue.

A $10 SP would value value ARU at $A2b, however with less than $5m cash, there will need to be more dillution before the anticipated production starts in 2011/2012.

For a mere $8.5m, ARU are giving the Chinese a placement @ 30c (approx 28m shares) & also another tranche @ 40c (Ouch to shareholders :()

If thats 28/(200+28m) shares or ~12% of the company, this agreement allows for up to 25%, so say another 39m (@ 40c raising another $15.5m), gives the Chinese 67m out of 267m shares on issue, or 25%.

Not sure how the 25% doesn't breach the takeover code, but nevermind

So if the Chinese get 25% of the company for $24m, wow have they struck a deal.

With 267m shares on issue @ $10 values ARU @ $2.67b* (theres numbers are off the top of my head, i see the presentation is more accurate)

Nolans Resource is 848,000 tonnes REO, @ 81% recoverable (= 687,000T)

There is capex expected of $A600m :confused: (More dillution, or farm down required?)

The actual revenue projections look quite good, a gross margin of $A250m before indirect costs (incl salaries), D&A, interest, tax etc etc

Of course where on earth is ARU getting the $600m from to fund this project from?

ARU would never get this from the bank (not with a market cap < a 1/4 of this), so to get $600m @ say the same as the Chinese deal means another 2b shares @ $0.30 to get the $600m, how many companies raise 4 times there market cap in a bear market????

That would have ARU with > 2.2b shares on issue, so now to get a $10 valuation the market cap climbs to $22b, somehow i can't see a $250m gross profit margin, before non direct costs (incl, Salaries, D&A, Tax etc) justifying this.

Even if ARU achieved $A200m NPAT, on a P/E of 10, thats a Market cap of $2b, & still a SP under $1!!!

I've looked at ARU & LYC, + the not so well known REE companies ALK & GBE, but the high capex costs put me off

Here's the presentation

http://www.stocknessmonster.com/news-item?S=ARU&E=ASX&N=441792

PS, This summation took under 20 mins!

[corporateraider]

Shasta, like you I cant see $10, and the huge capital cost scares me. I was wondering why they might achieve that after 3 years of production rather than year 1? Hence my reference to a ramping of production.
I like ALK much more. Their plan is to part fund development from their first gold project and the scale is smaller so less need for capital.. And then there is the second gold project. And they haven't given a chunk of the action to anyone at bargain basement prices yet!

DISC: Hold both

[shasta]

Shasta, like you I cant see $10, and the huge capital cost scares me. I was wondering why they might achieve that after 3 years of production rather than year 1? Hence my reference to a ramping of production.
I like ALK much more. Their plan is to part fund development from their first gold project and the scale is smaller so less need for capital.. And then there is the second gold project. And they haven't given a chunk of the action to anyone at bargain basement prices yet!

DISC: Hold both

ALK's a wee gem waiting to shine, not sure how they go about getting there Uranium out, being in NSW!

GBE has Niobium & Uranium, & i like what i read about them...

Rare Earths seem to be a year or two away, perhaps ready to benefit from Uranium when it increases in price?

[corporateraider]

I see the rare earths edged up again this morning

[Dr_Who]

Anyone have a valuation or reading on this pup?

I am keeping an eye on it and will look more into it this week.

[suntboy]

Gday Doc
My worry about aru as opposed to lyc when I was comparing them 2 or so years ago was more about the purity of their Rees (if I remember rightly)
Unfortunately I am in Oz checkin out my next investment and wont be home for a while to consult my notes

Welcome to Suntland

[Johnboy]

There has been a big rise in ARU over the last week. Does anyone know the basis for this. Production seems a long way off?.

[tobo]

Rare Earths have not had much profile: Starting to be more talk about them in US.

Also ARU has had some information gafs and hit hard by gobal crunch (as with so many juniors) and recently dilution to Chinese.
I think the recovery is partly through more people finding out about Rare Earths and choosing ARU (and ALK) over LYC (which is subject to a bigger Chinese dilution which is also awaiting FIRB approval).
The big conundrum is the logic of the $10 not making sense (as discussed above), versus the logic the Rare Earths ought to be subject to increased demand pressure over the coming years, sufficient to make them economic. (A bit like the POO outlook)
Just IMHO

[corporateraider]

Up 20% today so looking ok.
All rare earth stocks had a bit of a run.

Happy to hold ARU and ALK

[shasta]

Up 20% today so looking ok.
All rare earth stocks had a bit of a run.

Happy to hold ARU and ALK

Great day for the sector, especially those with heavy rare earths

ARU +15.5c to $0.905
LYC +16.5c to $1.24
RWD +2.5c to $0.45
ALK +8c to $0.67
GBE +5.5c to $0.285

[COLIN]

The US media are tipping the Australian and Canadian miners as good prospects.

Ah, that may explain the heightened interest in GGG (see my post, on their thread).

[Rusty]

Anyone following this stock? Share price has dropped off lately, seems to be some large volumes over the last couple of months.

[Rusty]

ARU selling ore to Gremany, announced on the 11 Aug (http://www.stocknessmonster.com/news-item?S=ARU&E=ASX&N=553653), share price hasnt done much untill today. Hopfully another good announcement on way.

[macduffy]

It's probably the Lynas announcement that's moving the ree stocks.

http://www.theaustralian.com.au/business/mining-energy/lynas-locks-in-supply-deal-with-basf/story-e6frg9df-1226127896922

I don't hold either ARU or LYC.

Hmmm .....But I see that ARU is up and LYC down!

[Rusty]

Interesting, imo there is only so much Lynas can supply as they are running at near full production. Plenty of room for others to step up at these REE prices

[macduffy]

Well, neither LYC nor ARU is actually producing anything yet but I take the point that they seem to have forward commitments for most of their initial planned output. Perhaps that can be expanded if the demand is still there at the time?

I've been prevaricating over these two stocks for longer than I care to remember but have always hesitated from taking the plunge!