High Hotrocks - I have been posting on the AOH threads over the recent days so you could read that thread to get my thoughts- Short version - as I understand it they put an NPV on the project of $105m - My view is ever since Glencore walked away from their 51% option I thought it would be best for the AOH shareholders to sell the whole project - as Exco did when they sold the CCP project to Xstrata for $175m
As we have seen with CDU costs and unknowns tend to escalate with these projects over time - CDU had the price gouging and crusher problems to name just a couple - Look also at the cost blowout at Dugald river for MMG - I have looked at the AOH DFS and the capex costs look a tad light on to me for a 7mt plant. I am no expert on these things im just taking a conservative view on it given they wont even make a decision to go ahead with the deal for 8 months while they do their D/D
Selling the whole project up front gives a known $$ return and it puts the money in the bank now - AOH chose to sell their working mine in Finland and return the proceeds to shareholders why not do the same here ? Why did Glencore walk away when they need the ore feed ?.
Personaly i dont like minority stakes in anything be it in private life or with listed companies but thats just my view - As we have seen on Friday things can come out of left field . I cant see that CDU would have gone to all the trouble to organize the placement to Focus Sun if they though there was a chance it would get voted down so I dont know what transpired there.
Another example was with PLV when their Chinese partner moved the goal posts on a funding deal the day before their EGM to fund Cockatoo Island that subsequently saw them enter receivership and the stock is still suspend from trade.
As for CDU being undervalued - all we have is gut feel how can anyone value it without seeing a DFS - My gut feel says yes but the register is now dominated by the large Chinese shareholders the Mums and Dads certainly deserve to be rewarded for their loyalty lets hope that does happen but it is still a big leap of faith at this point in time
CDU Price at posting:
$1.70 Sentiment: None Disclosure: Held
