Talk with the John or serge at Freewest Fair Offer Movement. Collectively, FFOM plue 11mil shares plus Noront affiliates came to a high enough number of "against" votes to make Cliffs reooffer. They still own, from what Wes said and can still vote. If Wes thinks Freewest's chromite is not worth Cliffs increasing the offer, then what does that say about how Wes feels about Noront's chromite. Cliffs will increase the offer, and Wes can help with that.

Read the following, and see why Wes was so excited about obtaining FWR chromite, and should be excited about our Noront chromite.

*******
copied from SH

posted on Jan 12, 10 08:39AM

Certainly useful for debate.....

"Especially when it comes to the aspect of Freewest’s NPV (Net Present Value) some posts are totally misleading - executed with ill purpose.

I’ll try present Freewest’s NPV objectively - showing where all numbers are coming from.

But, first I’ll lay down some basic information, as I see some here are unfamiliar with:

- Tonne (metric ton) = 1000 kg (2,202 lb)

- US unit of weight: ton (short ton) = 907 kg (2,000 lb)

- UK unit of weight: ton (long ton) = 1,016 kg (2,240 lb)

- 2.5 mt. (metric ton) of chromite (ore) is needed to produce one tonne of ferrochromite.

- US alone consumes about 14% (1.1 milion metric ton -2008) of the world’s production of ferrochrome.

Now, to find out the proper NPV we cannot consider the presently suppressed market price for ferrochrome (is not fair) but rather the standard five-year trailing average price.

The same goes for the average production cost of ferrochrome.

- Five-year trailing average price for ferrochrome is $1.25 lb.

- Five-year trailing average production cost for ferrochrome is
.50 lb.

- Average profit =
.75 lb.

Clifs intends to produce 800,000.00 tonnes of ferrochrome /year - 73% US consumption or 10% worldwide.

As, demand for chromite increased by an annual average rate of 4% for the period 2000 to 2008, with ferrochrome consumption increasing by the same amount, then it is fair to assume that the future consumption of ferrochrome will continue to increase at same rate. It will double in 14 years.

Production cost of ferrochrome from Black Thor (open mine, high grade) should be about
.50 lb. Therefore, average profit per tonne =
.75 X 2,202 = $1,651.50.

Total profit/year:

800,000 X $1,651.050 = $1,320,840,000.00 =$1.32 billion.

When subtracting the high average "combined" federal and state corporate tax rate in US, estimated at 39.3% (518 million) or Canada (15% effective January 1, 2012 +14 % for Ontario) 39% (514,80) we end up with about 683 million in net profit after tax.

But lets say that there are some other costs of 50 million/year, and the clear profit is just 633 million.

NPV = Net cash flow / the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.). 10%/year is a fair rate of return.

Now, Clifs said that they are looking to begin mining in 2015 (four years from now).

Their investment of 800 million $ will most likely come no sooner than next year (3 years before production) but it might be later. At 10% interest/year it will grew to 1.06 billion in 2014. And further 400 million $ will come one year before production, and again with 10% interest it will grow to 440 million $ in 2014.

Their total capital investment in 2014 will be 1.5 billion $.

But lets just imagine that they pay us (shareholders) 3 billion ($15/share).

In 2014 that 3 billion $ @ 10% interest would grow to 4.39 billion.

So, the total Clifs investment would be 5.89 billion.

We know, that chromite ore at Black Thore alone will last longer than 30 years.

However, I intend to find out how many years it takes for that project to pay for itself (NPV just above 0 - project is viable).

My calculation shows:

Year - Present value

1 - 633 million
2 - 575 - : -
3 - 523 - : - 1.5 billion + 231 million ($ 0.79/share) = 1.731 billion - project paid for.

4 - 476 - : - 1.5 billion + 707 million ($2.41/sh today ) = 2.207 billion - total pay off.
5 - 432 - : - 1.5 billion + 1.139 billion (3.89/sh) = 2.639 billion - paid off in 5 years.

6 - 393 - : - 1.5 billion + 1.532 billion ($5.23/sh) = 3.032 billion .
7 - 357 - : -

8 - 325 - : -
9 - 295 - : - 1.5 billion + 2.509 billion ($8.56/sh) = 4.009 billion invest. paid off.

10 - 268 - : -
11 - 244 - : -
12 - 222 - : - 1.5 billion + 3.243 billion ($11.07/sh paid today) = 4.743 billion.

13 - 201 - : -
14 - 184 - : -
15 - 16 7 - : -
16 - 151 - : -

17 - 138 - : -

18 - 125 - : -

19 - 113 - : -

20 - 104 - : - 1.5 billion + 4.426 billion ($15.11/sh) = 5.962 billion $.

The1.5 billion $ as outlined above, and 3.022 billion paid today for 200 million shares @$15.11/sh (which in the 4 years leading to ferrochrome production swells to 4.426 billion = 5.926 billion of the initial investment to be paid of in 20 years.

But, our chromite deposit will last much longer than 20 years so, @ $15/sh this project is still viable.

It was mentioned that US alone consumes about 14% (1.1 million metric ton -2008) and with the increasing demand of 4%/year it will double in 14 years.

With the additional cost of 1 billion $ Cliffs, should be able to double its production in a few years time, and paid of this project 5-6 years after that.

BTW: some “genius” on Agora&om wrote that chromite is no asset because it serves as additive in production of Stainless Steel

What a cr&p!

How about Nickel? 8% of it is added to produce 304 StS.

How about Copper as a part of alloys like brass, bronze or cupronickel (MN25 - coins etc.)?

How about Aluminum, Zink, Tin, and other “additives” like Wolfram, Molybdenum, Vanadium, Cobalt and so on?

Regards, TA"

Besides, how else will Cliffs maintain their current sp?

-sg