"The Option" agreement has now been initiated by AVB by paying Vale $500,000. (which is actually half of their own money held by AVB in safekeeping returned to them)
Off and away..
There is a two(2) year drilling period to establish a JORC where no payment happens. This period is used to establish the Pantera Price because nobody really knows how much copper is in the Pantera Historical Mineralised Zone.
THEN,
Option is Exercised after 2 years of drilling and Payment commences, but is capped at $3m p.a.
AVB suggest price is likely $20m min through to $35m max.
OK. At $3m/year this represents AVB's quoted time periods of actual paying of :
A. 7years x $3m = $20m approx or
B. 12years x $3m = $35m approx.
Thus it is 9 (7+2) years from today or 14 (12 + 2) years from today that payment is projected to be completed. This is a guide only as final price may vary.
I think I have got it right? I will ignore the outright purchase option which would involve a lump sum payment and AVB will always have better things to do with its cash than do a lump sum payment. IMO.
400,000t x 2000lb x 4c = $32m in one hit..... unlikely early... regardless.
Implications.
A pure debt scenario. Allowing broadly 2 years per mine for AVB, say 2 for PB and 2 for Centro ...which makes sense because if debt is the main funding source then $240m can perhaps be taken onto the books over 4 years with happy lenders and shareholders. Sure this can be argued about, but I am postulating.
OK add another 2 years for Pantera to be producing.. no make it 3 years to include the AVB factor where they never meet projected mine dates like AN where The Banco messed them around ... and Centro where negotiations etc are still messing them around forever... plus another PB-type capex of $150m for Pantera.
So that is seven(7) years to Pantera income. And a total of 240 + 150 = $390m debt... all being repaid from profits.
I can recall when it was projected and celebrated here that AN would return $40 - $50m profit p.a. and thus easily pay off its presumed debt to The Banco Boys in a year or so. Existing as we are today in the future and looking back, how real was that expectation, and how would that debt burden be affecting AVB today at current profit levels?
It might be interesting to look at the "real" cost to AVB of Pantera using Discounted Cash Flow. That is, in the case of a $35m price tag, evaluating the future stream of $3m repayments using the above payment schedule, discounting each payment appropriately for the eroding effect of inflation. If anyone has the software or time to value that payment schedule it would be interesting... at varying discount rates.
The TRUE COST if we are quoting todays dollars is NOT $35m !! but Todays value of that future repayment stream, appropriately discounted for the continuing marginal diminution of purchasing power.
The resulting true cost of Pantera to AVB now in the "best" case where the mine is big would be nothing like $35m!!! such are the benefits to the buyer of buying on the drip-feed with no inflationary allowance built in.!
I would notionally expect the true cost of Pantera to AVB today to HALVE! Amazing. And yet the price of copper does not go down with inflation
Well done AVB. An absolute super-bargain for the bottom drawer. Even if not appreciated by the market.
Sorry for the long post, but food for thought at least. PP
AVB Price at posting:
9.5¢ Sentiment: Hold Disclosure: Held
