My attempt at a NPV for the Chandgana Tal Coal Mine with 8% and 10% discounting rates.

It assumes the 8.5% net Sales Royalty with Tethy's is still in effect and includes a 1% annual increase on the mines $12.63 operating expense by Boyd to cover future capital improvements, wage increases and equipment upkeep. If the above assumptions were eliminated the NGP's would be higher than the final NGP figures.

 

Constructive criticism is appreciated.

 

The NPV is based on estimated data from previous reports and my assumptions. It covers the full 30 year period of supplying coal for the Chandgana Power Plant.

 

Column A gives the year and the sequential numbers used to calculate the NPV's at both 8% and 10% .

 

Column B gives an estimate of the proposed annual average price per tonne coal that Prophecy Coal received for the year in question and considers semi-annual increases of 2% per tonne coal (per Steag) and the initial six month price of $17.70 per tonne (per Boyd).

I feel that later year average coal price per tonne may be high and are caused by the 2% semi annual per tonne escalations, but adhered to this data (by Steag) as per the 01/17/2013 news release.

 

Column C gives the estimated annual coal production in million tonne for the year in question based on (Boyd), but for Prophecy's 80% interest.

 

Column D the Cash Flows for the year in question are calculated from the Column B annual average tonne coal price with the following considerations and estimates:

Contrary to the PEA of 11/02/2012 the 8.5% the Net Sales Royalty is assumed to be in effect during the first 8 years of mining, after which Prophecy pays Tethy's the required fee to end the 8.5% Net Sales Royalty. Since thys will have reasonable cash flow the closing of the net sales royalty should be possible.

The 1% annual operating expense of $12.63 minus the $12.63 and multiplied by the tonnage for the particular year will provide Prophecy over $150 million based on its 80% interest over 30 years of mining and may be used for new capital improvements, labor increases and upkeep of existing equipment before considering earning potential of the funds not used.

Between the 4th and 30th year.....[12.63(1.01^4)-12.63]2.8 =$1.44M for the the 4th year and [12.63(1.01^29)-12.63]2.8 =$11.83M for the 30th year. Potential funds generated (not considering the initial 3 years) = (1.44+11.83)/2 x 26 or $153.79M.

 

The first 8 years includes the 8.5% net sales royalty and 1% annual increase on the initial operating expense of $12.73

[($17.88)0.915 – $12.63]0.70*, (yr 1),

[($18.60)0.915 – $12.63(1.01)^n)]1.4*, (yr 2), with n-1

[($19.35)0.915 – $12.63(1.01)^n)]2.1*, (yr 3), with n=2

[($20.13)0.915 – $12.63^(1.01)^n)]2.8*, (yr-4), with n=3

[($20.95)0.915 – $12.63^(1.01)^n)]2.8*, (yr-5), with n=4

[($21.79)0.915 – $12.63^(1.01)^n)]2.8*, (yr-6), with n=5

[($22.67)0.915 – $12.63^(1.01)^n)]2.8*, (yr-7), with n=6

[($23.59)0.915 – $12.63^(1.01)^n)]2.8*, (yr-8), with n=7

 

Column E discounts the cash flows at 8% to bring the future years back to the present year for the NPV.

 

Column F discounts the cash flows at 10% to bring the future years back to the present year for the NPV.

 

 

 

 

A B C D E(8%) F(10%) Comments

1-2015

$17.88

0.70MT

$2.61M

-$2.61M

-$2.61M

CF pays part of $31.5M Capital cost

2-2016

$18.60

1.40MT

$5.97M

-$5.97M

-$5.97M

CF pays part of $31.5M Capital costs

3-2017

$19.35

2.10MT

$10.12M

-$10.12M

-$10.12M

CF pays part of $31.5M Capital costs

4-2018

$20.13

2.80MT

$15.14M

-$15.14M

-$15.14M

4 yr CF total of $33.84M checks reasobably with Boyd's $31.5M for initial mine CAPEX

5-2019

$20.95

2.80MT

$16.87M

$11.48M

$10.47M

 

6-2020

$21.79

2.80MT

$18.66M

$11.76M

$10.53M

 

7-2021

$22.67

2.80MT

$20.54M

$11.99M

$10.54M

 

8-2022

$23.59

2.80MT

$22.52M

$12.17M

$10.51M

End of Net Sales Royalty with Tethy's

9-2023

$24.54

2.80MT

$30.42M

$15.22M

$12.90M

 

10-2024

$25.53

2.80MT

$32.81M

$15.19M

$12.65M

 

11-2025

$26.56

2.80MT

$35.30M

$15.14M

$12.37M

 

12-2026

$27.64

2.80MT

$37.94M

$15.07M

$12.10M

 

13-2027

$28.75

2.80MT

$40.65M

$14.95M

$11.78M

 

14-2028

$29.92

2.80MT

$43.53M

$14.82M

$11.46M

 

15-2029

$31.12

2.80MT

$46.69M

$14.72M

$11.13M

 

16-2030

$32.38

2.80MT

$49.61M

$14.48M

$10.80M

 

17-2931

$33.69

2.80MT

$52.86M

$14.29M

$10.46M

 

18-2932

$35.05

2.80MT

$56.26M

$14.08M

$10.12M

 

19-2033

$36.47

2.80MT

$59.81M

$13.86M

$9.78M

 

20-2034

$37.94

2.80MT

$63.50M

$13.62M

$9.44M

 

21-2035

$39.47

2.80MT

$67.37M

$13.38M

$9.10M

 

22-2036

$41.07

2.80MT

$71.41M

$13.14M

$8.77M

 

23-2037

$42.73

2.80MT

$75.63M

$12.88M

$8.45M

 

24-2038

$44.45

2.80MT

$80.00M

$12.62M

$8.12M

 

25-2039

$46.24

2.80MT

$84.57M

$12.35M

$7.81M

 

26-2040

$48.12

2.80MT

$89.38M

$12.08M

$7.50M

 

27-2041

$50.06

2.80MT

$94.36M

$11.81M

$7.20M

 

28-2042

$52.61

2.80MT

$101.05M

$11.71M

$7.01M

 

29-2043

$54.19

2.80MT

$105.01M

$11.27M

$6.62M

 

30-2044

$56.38

2.80MT

$110.67M

$11.00M

$6.34M`

 

 

 

 

 

$311.24M

$220.07M

NPV values of 8% (Col F) and 10% (Col G) respectively

 

    A starting coal price is $17.70 per tonne with semi-annual 2% increases after the first 6 months of sales

    Discount Rate at 8% gives a Net Present Value (NPV) of $311.24M over 30 year life of project, or $1.38 per share on outstanding shares as 12/05/2012

    Discount Rate at 10% gives a Net Present Value (NPV) of $220.07M over 30 year life of project or $0.97 per share on outstanding shares as 12/05/2012

     

    The above is before potential income from Prophecy's other coal assets