"233 mt/d of 3.5% ore gives us about $173,000 gross per day. 966 mt/d of 0.6% gives us an additional $122,750 per day for a combined gross revenue of $295,750 per day x 30 = $8.87 million/month, less mining & production costs of about $2.30 million per month for a net of $6.57 million per month. [if I've not made an error!] That's more than enough to repay the loan within the year. In fact it could be repaid in less than four months! [assuming $13.50 / lb nickel price] assuming no contributions from the Redstone mine.

Assuming 2% ore, 200 mt/d production, 90% recovery, 79% split with Xstrata, $11.75 nickel at LME and $3.50 production costs we have.....

200 x 30 x 0.02 x 0.90 x 0.79 x 2205 x [$11.75 - $3.50] = $1.55 million from Redstone per month. Add the $1.55 million to the $5.41 million from McWatters and we will have a total revenue stream of $6.96 million. We should round it up to an even $7.0 million since I only used 2% ore at Redstone and only 30 days to a month when the "average" is just over 30.4 days! :) "

Great analysis, JohnEStromJr, math looks good.

Pulling out my spreadsheet and taking this one step further, then:

PER QUARTER:

Nickel @ $14.00 per lb

Revenue: $35.5mm (1,150t of Ni)
Mine costs: $8.9mm (at $3.50/lb)
Net before depletion/G&A: $26.6mm

Ni @ $13/lb
Net before depletion/G&A: $24.1mm

$12.00/lb --> $21.6mm
$11.50/lb --> $20.2mm
$11.00/lb --> $18.9mm
$10.50/lb --> $17.8mm
$10.00/lb --> $16.5mm
$ 9.00/lb --> $13.9mm
$ 8.00/lb --> $11.4mm

Depletion:
This is a hard one to judge. A lot depends on how much we have to spend to get McWatters up and running. For 2007, it was about $2.30 per pound for depletion ($2,065,874/898,138). I'll err on the side of caution and go with $3 for McWatters, though it will likely prove to be lower (depletion cost tends to be lower with larger ore bodies as we have more ore to spread the cost over). I'd rather be surprised to the upside with my estimates.

With 2.525mm lbs of Nickel extracted per quarter, that gives us a depletion cost of $7.6mm.

This arrives at our gross profit number. $3.8mm for $8 Ni up to $16.5mm for $13 Ni.

Subtract out our estimate for G&A expenses for a quarter. I'm going to go with $2.5mm per quarter to be on the safe side again. This is likely high, but better to estimate high than low.

Lastly we get hit with income taxes. We'll go with 15%.

Taking our various price points from above, here is what we get:

$8 Ni, $1.1mm profit (EPS $0.01)
$9 Ni, $3.2mm profit (EPS $0.04)
$10 Ni, $5.4mm profit (EPS $0.07)

Add another $2.1mm for each $1 in Nickel price. With $13 Ni, that's a net profit of $11.9mm. EPS of about 0.15 for the quarter. 0.60 for the year.

I imagine most analysts are pegging the nickel price in that $10-$12 range. When they do that, they would arrive at an EPS estimate around $0.10 per quarter, $0.40 for the year. That should push us in to that $2-$3+ share range.

I am very reassured to think that we could still stay afloat with $8 nickel. The price likely won't drop that low, but in case it does, at least we know we have some cushion. Should it drop below that, we will likely shut down the mines and mill and wait until prices recover past our break-even point.

Cash flows from operations will be considerably higher than net profit, due to depletion and amortization not being a cash flow item. This excess cash can be turned in to further exploration and acquisition.

I like the outlook. If things go as planned, and they seem to be moving well, we'll be looking at a very different company in 12 months' time.

If someone has a calculator and can check my computations, would be greatly appreciated. Much too late for me to go back and triple check everything.