Ann: Change in substantial holding from MIN, page-128

Gentlemen,
Lets have some civility on this thread. Everyone is entitled to their opinion and valuation and that should be respected and all parties agree to disagree, whether you agree with it or not.
Like old geo, I am an 'old timer' in the oil and gas upstream business, local and international.

I have been involved throughout my past career in the decision making on many development and production purchases/takeovers with rigorous valuation reports on resource and recoverable reserves in all categories carried out by independent specialists such as De Goyler & McNaughton, Sproule, etc.

From long experience, I have found a useful but very rough 'rule of thumb' in evaluating the NPV of an onshore reserve/resource, gas or oil is ~ 1/3 the expected wellhead sale price. So if for example, for North Perth Basin gas, if the well head sale price is $6/mcf, then the NPV of the gas is $2 /mcf.

For the total estimated resource/reserve, then an approximate 10% NPV can be calculated by taking the estimated resource/reserve number in bcf and multiply it by a 1/3 of the expected well head sale price/mcf. This is obviously an unrisked $ value generalisation not allowing for appraisal and development drilling risk.

I would also add that if you can buy long life gas production on a 10% NPV basis at current well head price, then you are doing a very good deal as when the NPV goes to zero in say 4 years time on your spreadsheet, then surprise, surprise, if you do a fresh NPV calculation in 4 years time, then the NPV will still be the same, all other parameters kept constant. I would suggest this would apply to any valuation of Lockyer Deep, once it has started production.

So for any company with a potential gas resource/reserve,you can for your own use, make a 'guesstimate' of the 'discovery value per share' from shares on issue and percentage equity in the resource /reserve. Note that this is a totally unrisked number. Some accounting for geological resource/reserve risk in the 'discovery value per share' can be made working off P90/
P50/ P10 resource/reserve numbers as mentioned by old geo.


Although the focus by many parties has been on the valuation of the quantum of potential resource/reserves at Lockyer Deep, risked, unrisked, etc,. you might as a Norwest shareholder ask why if Minres already has ~80% of a very good thing as Minres has publicly stated, why does Minres want or indeed need another 20% from Norwest?

I would surmise it is mandatory in Minres's view that Minres controls the JV because of the current JOA minimum of two parties in the JV must agree on all work in the permits other than minimum government work programs. This is the 'nuisance' value attributed by Minres to Norwest in the current JV's/JOA's or less eloquently 'how can a 20% party control/ block what an 80% party wants to do in the permits as the 80% party is putting up almost all of the money!'
This is unheard of in the mineral upstream and downstream industry!

So there must be a significant control premium in the valuation of Norwest.

Contrary to some posts made, Machiavellian as it may sound, Minres will not delay drilling, development, etc as Minres are an 80% holder in the assets of the two permits and 'wants to get after it' with relatively near term production the aim as Minres has publicly stated.
One doesn't cut off ones nose to spite ones face!!

I am of the view that for the potential high side resource/reserve estimate for Lockyer Deep, that the current bid from Minres is too low or 'sub optimal'. A much improved offer from Minres before 20 February might gain more acceptance traction from Norwest shareholders than the current 1300 for 1.

I would suggest that with an improved 1000 for 1 offer, Minres would get a fair way to their 90% of Norwest shares target as the hedge funds recently in the stock as well as the major shareholders would accept, even allowing for any possible downside risk on the Minres future share price.

I observe that some Norwest shareholders may not accept any improved offer from Minres as there view is that there is more leverage to any future drilling success by holding Norwest shares rather than swapping for Minres shares. I would agree with this view, to be proved or otherwise, by the drill aka 'the rotary lie detector'!

Minres are a great company, very successful and no doubt will continue to grow and be successful under the leadership of Chris Ellison and his team in the areas of lithium/iron ore/ mineral services and gas. Minres obviously believe there is a large potential multi tcf gas resource at Lockyer Deep as per their recent public pronouncements of planning for a 250 million cubic feet per day gas plant etc. This would be a very major gas plant investment requiring a major high production gas reserve!!!

So as a Norwest shareholder I await an improved offer from Minres.

All the contents of this post must be considered highly speculative and none of this post is to be taken as financial advice, so please DYOR.