Morien Resources (TSXV: MOX) gained by 20.41% on Thursday to a new 18-month closing high of $0.295 per share.
MOX's current market cap at $0.295 per share is only $15 million when the company has $2.5 million in cash and no debt. MOX is currently receiving $100,000+ per year in advance royalty payments from America's largest aggregate company Vulcan Materials (VMC) for MOX's Black Point Aggregate Project royalty. If VMC decides to move forward with Black Point and bring the project into production, MOX will receive a $400,000 milestone payment and once in production MOX is projected to receive $500,000+ per year in royalties from VMC. Black Point will have a 50+ year mine life and we believe MOX would be able to sell its VMC royalty today for at least $2.5 million in cash.
With MOX's cash and revenue generating VMC royalty worth a total of $5 million, the market is currently valuing MOX's 2%-4% gross production royalty in the Donkin Coking Coal Mine at $10 million.
The market values royalties in a mining project approximately 10X higher than equity in the same project, because royalty owners receive income from a mine's production without being responsible for paying any operating/capital expenditures. Conservatively, if we assume MOX only averages a 2% royalty on Donkin's production, MOX's royalty deserves a valuation equal to owning 20% equity in the Donkin Coking Coal Mine.
With MOX at $0.295 per share only receiving $10 million in value for its Donkin royalty, it implies that the Donkin Coking Coal Mine is only worth $50 million. We know for a fact that Donkin in its current non-producing state is worth many times more than $50 million!
Bowen Coking Coal (ASX: BCB) after tripling in value over the last six weeks has a market cap at $0.172 per share that converted to CAD is equal to $193.5 million. If we subtract BCB's cash converted to CAD (it has no debt) of $3.5 million, BCB's coking coal projects are being valued at $190 million!
BCB owns five early stage coking coal projects in Australia that have a total combined measured & indicated coking coal resource of 152.79 million tonnes plus a total combined inferred coking coal resource of 169.4 million tonnes. In comparison, the Donkin Coking Coal Mine is a massive project with a measured & indicated coking coal resource of 227 million tonnes plus an inferred coking coal resource of 254 million tonnes!
Donkin's measured & indicated coking coal resource is 48.57% larger than BCB's total combined measured & indicated coking coal resource!
Donkin's inferred coking coal resource is 49.94% larger than BCB's total combined inferred coking coal resource!
On a conservative basis if we go by Donkin's measured & indicated resource being 48.57% larger than BCB's total combined measured & indicated resource and BCB's coking coal projects being valued at $190 million... Donkin would be worth $282.28 million!
We know for a fact that Donkin is worth much more than $282.28 million! Chris Cline who was considered by President Trump to be the greatest coal miner of all time spent $250 million through Kameron Collieries ULC since 2015 developing Donkin's infrastructure and getting the project fully permitted for production. After Donkin gets acquired by a major coal miner it could be back in production within a few short months. All of BCB's coking coal projects are years away from production and would require huge CAPEX investments to develop the infrastructure needed for production!
NIA believes that Donkin is worth approximately $500 million today in its non-producing state and will immediately be worth significantly more once it is back in production!
If we ignore all of Donkin's infrastructure and the fact that it can be back in production within months and we value Donkin's 2%-4% gross production royalty at only 20% of Donkin's most conservative possible valuation of only $282.28 million, MOX's royalty in Donkin would be worth $56.456 million! Including MOX's cash plus VMC royalty, MOX deserves to trade right now at an absolute minimum market cap of $61.456 million!
MOX has dramatically reduced its shares outstanding in recent years down to only 50.91 million! Therefore, trying our hardest to value MOX as low as possible by being as extremely conservative as possible every step of the way... MOX deserves to trade right now for $1.21 per share with Donkin in its current non-producing state!
Once back in production, MOX projects that they can earn approximately $15 million in royalties per year from Donkin! Almost all royalty mining stocks start out at a valuation of 10X their annual royalties and many trade at valuations of 20X their annual royalties or higher! Once Donkin is back in production, MOX's royalty could very conservatively be worth $150 million and MOX could easily trade at a market cap of $155 million! A market cap of $155 million would value MOX at $3.05 per share!
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