Ann: Appendix 3B, page-40

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HAC30

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23/11/18

21:07

Post #: 36623688
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Originally posted by BWinter: ↑

I like to think the BFS assumes 100% debt funding but in reality I think it just assumes that it will be funded and goes from there.
Notice that the NPV is quoted at a discount rate of 8%. That, to me, says that if the project was funded by 100% debt at an interest rate of 8% and the term of the loan was the life of the project, then the project would be able to repay the entire debt and still have $700M (in today's dollars) in profit. If you assume equity funding, then the company can pay dividends (in stead of paying off the loan) and still end up with $700M. In practice it will be a mix of both (debt and equity).
The upside for current investors is:
1) current MC is ~120M vs NPV of $700M. Plenty of room to re-rate as other hurdles are passed.
2) potential upside from current and future drilling
3) potential upside from other projects
... (sure you can add more here)
Main risks I see:
1) unable to secure funding
2) cost overruns in construction phase
3) fail to reach nameplate capacity
4) adverse movements in mineral prices or exchange rates
... (and add more here).
DYOR

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The BFS is modelled with zero debt repayments included. Thats how they work. They don't know what the interest rate or repayment terms would be at this stage so it is modelled without it. Any repayments need to come out the cashflow quoted in the modelling and they have said they will look to fund 40% equity and 60% debt so any numbers you run personally should include what you think those repayments will be.

A discount rate is different. A discount rate reduces the value of the cashflow in the NPV calculation by 8% per year due to the uncertainty of the future. The IRR figure is the discount rate that would make the NPV of the project zero (15% in this case).

Discount rate and interest rate on debt are very different.

AUZ Price at posting: 4.6¢ Sentiment: Sell Disclosure: Not Held
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