Ok what the hell I will put in my view on takeover price assuming JORC proves up the needed resource to be able to have a feed ore of 2 mtpa, 5mtpa and 10 mpta per annum and the market can accommodate this.
@8horse, I will even use your estimates and extrapolate a number for a 10 mtpa (and won't question the inputs you are using). Including options, based on the latest 3B looks like there are about 2.4 billion shares on issue (options and heads and unlisted).
The assumptions I am using is that 40% of the NPV benefit will be attained by AVZ in the takeover (project specific NPV). I will then bump this up by another 20% due to AVZ been able to extract a strategic benefits takeover price for AVZ - others need to refer to my posts of yesterday to understand what I am blabbering on about here and why I am using 40%, if not your call.
On the assumptions above, and as I have stipulated previously for a 2mpta operation and using your 40 year NPV benefit TO price estimated at 29c per share heads (deduct strike price to get to option price), 69c for heads at 5 mtpa and extrapolating a 10 mtpa scenario $1.38 per share. So that is the importance of scale. All workings are hypothetical and based on an understanding of the input parametres which could be wrong btw. Stay mellow and may the VB flow. All IMO Now getting to JORC is fundamental in achieving these estimates above - if TO is done pre JORC I doubt they will get anywhere near this price. All IMO
For AVZ to extract the right TO price it must get ahead of the game and understand how the mine could be developed by the buyer, at what production scale and what strategic benefits are available. AVZ will need to do its own modelling btw and have this type of understanding IMO to extract a fair price. Now all the above is hypothetical because it does require a contestable market - more than one bidder. If there is not then the TO price could be lower on the assumption that AVZ will not develop the mine.
IMO one mistake AVZ has made is that IMO it has basically told the market it will not be the miner - a card to have played to extract the best price is if you don't pay up we will mine it ourselves and that would be an important card to play if their is only one buyer (in a consortium I guess I am talking about). All IMO IMO IMO
Everything above is hypothetical as need to get to a JORC showing an indicated an measured resource. But there is another step and that is the bankable study/assessment which moves that resource to the proven and probable reserve which underpins a mining investment decision and AVZ when it gets its JORC needs to get that understanding pretty quick to understand how it can extract the best TO price for SH as the above estimates are based on that notion.
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
| 1 |
Assumptions |
|
|
|
|
| 2 |
1. NPV benefit attained by AVZ |
|
40% |
40% |
40% |
| 3 |
2. Strategic value TO premium |
|
20% |
20% |
20% |
| 4 |
|
|
|
|
|
| 5 |
Scale |
|
2mtpa |
5mpta |
10mpta |
| 6 |
NPV benefit (100% assumed at production) |
|
1,473,000,000 |
3,456,000,000 |
6,912,000,000 |
| 7 |
|
|
|
|
|
| 8 |
TO NPV benefit for AVZ (project specific) |
|
589,200,000 |
1,382,400,000 |
2,764,800,000 |
| 9 |
|
|
|
|
|
| 10 |
TO premium for strategic value |
|
707,040,000 |
1,658,880,000 |
3,317,760,000 |
| 11 |
|
|
|
|
|
| 12 |
Number of headsoptions/unlisted AVZ shares |
|
2,400,000,000 |
2,400,000,000 |
2,400,000,000 |
| 13 |
|
|
|
|
|
| 14 |
TO price per share |
|
$0.29 |
$0.69 |
$1.38 |
To understand my comments on proven and probable reserves (and how they differ from measured and indicated resources -JORC) the below graph may help others out. As I said back to distilling a mirage inside a dream with my beloved VB in hand. Hope you had a great NY, I actually drank wine today for the first time in a long time (my brothers said no VB for you today but now have one as I am at home) hence this dribble I have written. All IMO
