Mwana Africa - one of the cheapest miners out there

Mwana Africa is primarily located in Zimbabwe which is the only reason the stock is trading lower than the price that management and institutional investors paid into the company.

Why? Because the Zimbabwe government publicly announced partial nationalization of the countries resources. Should that be a big surprise after so many years of the current regime there?

I went to Mwana's website and here is a behind the napkin calculation on what an investor should be expecting concerning a return.


Gold



1) Lets says the Zimbabwe government takes a 60/40 split.

2) And the cost of extracting gold is $800/oz

3) Lets say gold stabilizes at 1100



= 300/oz profit.



4) They expect a minimum of 30,000oz per year.



So the net would be 9,000,000

The net to shareholder would be 3.6m



Just on Gold possession, that is 50m market cap/ 3.5 m = 14.3 PE



Not bad.



Nickel



1) Up to 7,000t pa Ni in concentrate

2) Cost of production approx. $6,000 / t Ni in concentrate

3) Ni is around 24,000 per ton

4) Lets say the concentrate is the low 0.40% as mentioned in presentation, Pure Nickel is 28 tons for the year



28 tons x 24,000= $672,000

Minus expense of $42,000

And comes out to $630,000



The Stakeholders get 40%, or $252,000



Now the P/E is lowered to 50 market cap/3.72 = 13.44



That's a 7.44% return minimum



And that is after the Zimbabwe government won't fully nationalize its mineral assets.

What if previous agreements will be honored?