Pre-feasibility EBITDA Analysis of Korab Resources Ltd's Winchester Magnesite Project



Yesterday’s ASX announcement by Korab Resources titled ‘Winchester Magnesite Direct Shipping Ore Feasibility Study Results (Earnings, NPV, EBITDA, CAPEX, and OPEX)’1 estimated an EBITDA over a period of 12 years to be between AUD$613.60 million to AUD$614.20 million. These earnings were estimated assuming a tonne of magnesium carbonate priced at USD$105.00 at an exchange rate of AUD$1.00/USD$0.80.

Following sections of this blog post analyses estimated EBITDA after the application of consumer price index. For the purpose of this analysis it is assumed the increase in CPI over 12 years of the Winchester project life will be identical to average increase in CPI over last 12 years for which data is available (i.e. 30/06/2006 to 30/06/2017) on ATO and ABS website2.

Quarter ending CPI rates actual as per ATO website3:

Year
31 March
30 June
30 September
31 December
2017
110.50
110.70
111.40
  112.10
2016
108.20
  108.60
  109.40
  110.00
2015
106.80
  107.50
108.00
108.40
2014
105.40
105.90
106.40
106.60
2013
102.40
102.80
104.00
104.80
2012
99.90
100.40
101.80
102.00
2011
98.30
99.20
99.80
99.80
2010
95.20
95.80
96.50
96.90
2009
92.50
92.90
93.80
94.30
2008
90.30
91.60
92.70
92.40
2007
86.60
87.70
88.30
89.10
2006
84.50
85.90
86.70
86.60

Per year average increase in CPI from 30/06/2006 to 30/06/2017:

(110.70-85.90)/12=2.0667

Estimated CPI for following years:

Date
Actual CPI
Average increase (estimate)
 Estimated CPI
30/06/2017
110.7


30/06/2018

2.0667
  112.7667
30/06/2019

2.0667
  114.8334
30/06/2020

2.0667
  116.9001
30/06/2021

2.0667
  118.9668
30/06/2022

2.0667
  121.0335
30/06/2023

2.0667
  123.1002
30/06/2024

2.0667
  125.1669
30/06/2025

2.0667
  127.2336
30/06/2026

2.0667
  129.3003
30/06/2027

2.0667
  131.3670
30/06/2028

2.0667
  133.4337
30/06/2029

2.0667
  135.5004
30/06/2030

2.0667
  137.5671

Min EBITDA (at US$105/Tonne magnesium carbonate price and forex being AUD$1.00/USD$0.80) after application of estimated CPI (assuming earnings for the year 1 ends on 30/06/2019):


A
B
C
 D = A(B/C)

Min EBITDA (in AUD '000) per ASX announcement4
CPI previous EOFY
CPI at EOFY
 EBITDA (in AUD '000) after CPI
Year 1
     37,200.00
   112.7667
   114.8334
     36,530.50
Year 2
     37,800.00
   114.8334
   116.9001
     37,131.73
Year 3
     37,500.00
   116.9001
   118.9668
     36,848.55
Year 4
     49,700.00
   118.9668
   121.0335
     48,851.35
Year 5
     50,275.00
   121.0335
   123.1002
     49,430.94
Year 6
     50,275.00
   123.1002
   125.1669
     49,444.88
Year 7
     50,275.00
   125.1669
   127.2336
     49,458.37
Year 8
     50,275.00
   127.2336
   129.3003
     49,471.42
Year 9
     62,575.00
   129.3003
   131.3670
     61,590.55
Year 10
     62,575.00
   131.3670
   133.4337
     61,605.80
Year 11
     62,575.00
   133.4337
   135.5004
     61,620.58
Year 12
     62,575.00
   135.5004
   137.5671
     61,634.92
Total
   613,600.00


   603,619.59

Max EBITDA (at US$105/Tonne magnesium carbonate price and forex being AUD$1.00/USD$0.80) after application of estimated CPI (assuming earnings for the year 1 ends on 30/06/2019):


A
B
C
 D = A(B/C)

Min EBITDA (in AUD '000) per ASX announcement5
CPI previous EOFY
CPI at EOFY
 EBITDA (in AUD '000) after CPI
Year 1
     37,300.00
   112.7667
   114.8334
     36,628.70
Year 2
     37,900.00
   114.8334
   116.9001
     37,229.96
Year 3
     37,600.00
   116.9001
   118.9668
     36,946.81
Year 4
     49,800.00
   118.9668
   121.0335
     48,949.64
Year 5
     50,300.00
   121.0335
   123.1002
     49,455.53
Year 6
     50,300.00
   123.1002
   125.1669
     49,469.47
Year 7
     50,300.00
   125.1669
   127.2336
     49,482.96
Year 8
     50,300.00
   127.2336
   129.3003
     49,496.02
Year 9
     62,600.00
   129.3003
   131.3670
     61,615.16
Year 10
     62,600.00
   131.3670
   133.4337
     61,630.41
Year 11
     62,600.00
   133.4337
   135.5004
     61,645.20
Year 12
     62,600.00
   135.5004
   137.5671
     61,659.55
Total    614,200.00


   604,209.41

Disclaimer:

All data and information provided in this blog post is for informational purposes only. The author will not be held liable for any losses, injuries, or damages arising as a result of using this information. All information is provided on an as-is basis.

Foot notes:

1 https://www.asx.com.au/asxpdf/20180321/pdf/43smlr0m994vvd.pdf - link working at the time of publishing this blog post

2 https://www.ato.gov.au/Rates/Consumer-price-index/# - link working at the time of publishing this blog post

3 https://www.ato.gov.au/Rates/Consumer-price-index/# - link working at the time of publishing this blog post

4 https://www.asx.com.au/asxpdf/20180321/pdf/43smlr0m994vvd.pdf - link working at the time of publishing this blog post

5 https://www.asx.com.au/asxpdf/20180321/pdf/43smlr0m994vvd.pdf - link working at the time of publishing this blog post


Comments

Popular posts from this blog

Recommendation to Youtube to allow auto publish Linkedin user videos

Content piracy challenge: perceived versus actual loss of revenue, and tackling it.