PLS don't have the cash to buy AJM and debt funding it would be stupid. I think the best possible outcome would be for them to merge on a 2 PLS for 5 AJM basis with the two companies sharing exec positions. I think you could get a good mix from the two current management groups.
This would give PLS a touch over 1.6bn shares on issue. You would then do a 4:1 consolidation of shares to get that down to about 400m. I think by doing this shares could easily push up to about $2.50 a piece (after consolidation) and value the combined entity at around $1bn right now.
You would start immediately as a 4Mtpa operation and do it from AJM tenaments as they have no ROFR and most mining leases etc are locked down. You would then use the time afforded by that to lock down all issues that PLS have in time to need that resource. You then move to 6Mt and 8Mt over the next 5-10 years and make a motza.
We have AJM with good offtakes. You could offer ON double what they want now and that is 2Mt of offtakes locked. If GLC stands that is ok and sign another one or two.
Combined entity would need about $200-220m more in funds for Capex. You could get half of that by prepayments from future BOA's and debt fund the last 100m. The combined entity could repay that debt in year 1 from FCF and then you have a debt free, low cost producer who owns the majority of Pilgangoora.
It makes sense to me
AJM Price at posting:
13.0¢ Sentiment: Hold Disclosure: Held
