I have been watching FAS for a while as I like the resource.
I have a holding myself which I am considering adding to.
My skepticism is the only thing holding me back from throwing the more money at this one.
On the face of it management appear to have pulled off the deal of the century. A 3mtpa operation could make as much as $120m per annum assuming a $40 margin as some have alluded to in this thread. 50% of this is $60m. So Alliance are paying $260m for a $60m potential profit which is around a 20% return. Not a wonderful rate of return given the risks such as commodity price volatility and the fact that they are committing to a whopping 80% of funding.
I am not saying this deal is bogus, but I am asking is there more to this asset then meets the eye? Is there huge upside potential to SHIP or SHIP North which us retail shareholders are unaware of. There has to be something more to this asset for FAS to attract this type of investment. Perhaps the Due diligence completed by Alliance suggests that their is significant upside to our 3mtpa of production?
The alternative view is that the deal is B/S, but I am an optimist and as such prefer to look at the glass half full angle.
As far as FAS - well this is a multibagger assuming the $60m is provided, which based on what management have said is a matter of time.
50% of profit should be $50m at a minimum. Apply a conservative PE of 4x and you have a market cap of $200m+.
This should see us over 10c from here. For not I will leave the cork in the champagne bottle, however if this is the real deal the pop of the cork may not be too far away.
For now I will remain cautiously optimistic.
FAS Price at posting:
1.3¢ Sentiment: Hold Disclosure: Held
