Baukaw is spot on. He is probably one of the handful of people here who have actually read an IER.
A relevant recent example is the one done for the Brockman takeover by Wah Nam by Deloitte.
BRM, like SDL, is an explorer & project developer and not in production.
The valuation is done on a sum of parts discounted cash flow (DCF) model.
The key assumptions are obviously long term benchmark iron ore price (USD $70 used for BRM IER) and discount rate (13-14%).
The other key factor is that the DCF analysis is done based on iron ore Reserves (only Proven & Probable) and not Resources.
Therefore the recent Resource upgrade WILL NOT effect the DCF valuation.
The DCF valuation will therefore be based on the 350mt Reserve ie 35mtpa for 10 years only.
As Baukaw says, a range of valuations will be provided because of the variability and sensitivity analysis of the asumptions used.
The IER needs to be included in the first Scheme Booklet which is supposed to be issued to ASIC by 10th September.
The IE is Ernst & Young and is appointed by SDL.
Hanlong has the right to review any drafts of the IER prior to going into the Scheme Booklet.
I would not be surprised if a draft of the IER was already given to Hanlong (because we are not far away from 10th Sep), which found its way to NDRC, and NDRC came back and said we want to pay at the bottom end of the range that was in the draft IER.
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