Just crunched the pivotal assumption numbers on estimates:-
1) USD 7.14 @ .70 exchange rate indeed calcs to AUD 10.2 (per lb). I can't comment on the mechanics for the IRR calc, will take that as read
2) If you look at it, using today's numbers (spot metal number sourced from *****, exchange rate sourced from XE) USD 5.12 @ .597 exchange rate = AUD 8.57 (per lb)
3) The current spot price is 11055/t, and the Dec 21 futures contract is 11537/t - data sourced from LME
So the differences I get are ~16% less - the difference between (1) and (2), with a 4.3% increase in the value of the futures contract versus today' spot (3). If the futures number is correct, then the overall diff between (1) and (2) will come down.
Whilst I am no expert on DFS construction and futures estimation (especially currency - with our current CV-19 chaos) - it feels to me that the DFS numbers (dare I say it) overstate the top line value, and hence skew the IRR (assuming that price, exchange reate and future value are the only levers that get pulled). Of course, there is a lot of upside at Cassini not factored into the DFS, so that will, to a degree nullify any possible overstatement of value and IRR.
Additionally, if the exchange rate goes up, then the value of the DFS goes down. Conversely if the rate goes down, then the DFS value goes up. Current USD/AUD exchange rate is still trending down.
I am not trashing the data quality of the DFS or work done, but rather present this lot for comment from the forum - as there are some experts who hang out here.
Other than that, the data in DFS looks compelling, and I am happy with my holding.
Please criticise my logic / comment on the findings - let me know if I am taking through my hat !!!!
Cheers
MCR Price at posting:
45.5¢ Sentiment: Hold Disclosure: Held
