SFX Valuation December 2018

I've been buying these on the way down since NAIF announcement, so bit under water currently, although did pick up last tranche at 75 cents on day of trading halt.  Just been trying to get some clarity on valuation for myself and thought I would write some of it down:

There are a couple of good research reports on company website - worth a read.  They appear to be independent/unbiased

http://www.sheffieldresources.com.au/irm/PDF/3151_0/BlueOceanEquitiesResearchReport

http://www.sheffieldresources.com.au/irm/PDF/3101_0/IndependentInvestmentResearchReport

current market cap fully diluted = 244 million shares fully diluted x 75 cents = $183 million (pre current CR)

last CR Nov 2017 at 70c/share for $32 million and significantly oversubscribed - scaled back - lots of work and added value in the last 12 months

cash flow report last quarter showed $13 million left in bank, so spending $8 million per quarter or so, and now need more to keep the lights on hence current CR which has been expected by the market and caused significant SP slump leading up to announcement

Budget now $463 million to build stage 1

They have debt funding locked in $175m Taurus and $95m NAIF = $270 million - they need another $193m to make it happen, plus a bit more to keep the lights on until cash flow starts in 2020 so lets say another $27m = total $220 million +/- in presumed mix equity/debt

They need another $240m to build stage 2 but this will likely be derived from existing cash flow and refinancing debt

Estimated NPV is $711m according to Blue Ocean based on BFS but more like $900m on current spot Zircon prices and projection is for prices to rise in coming years not fall.  Using WACC 10% or 8% after tax ie. you can expect that return if you own this project and have invested $711 million

Blue Ocean envisage a strategic partner buying a 20% stake in Thunderbird for $100mill, which would of course value Thunderbird at $500mill and SFX's stake of 80% at $400 mill, more than double current MC, and does not take other discoveries such as Night Train into account

Independent Investment suggest a CR of $175mill at $1 per share would be feasible - I think this is less likely based on sentiments from management of minimizing further dilution

Free cash flow once stage 1 and 2 are built and debt all repaid is expected to be $200+ per year, so eventual valuation $1 billion +is conservative

The numbers predicted re capex, opex and revenues have undergone extensive independent auditing by Taurus and NAIF which means they are likely as close to correct as is able to be predicted, if not a bit conservative

Blue Ocean values shares currently at around $2.10, and eventual target closer to $3

Independent Investment has current valuation at $1.75 moving up to $2 

Given all of the above, I would be very surprised if the CR is anything close to last close of 75 cents - should be closer to $1 at least.  I am lost regarding the incentive to push the price down prior to a CR, that's just conspiracy theory rubbish.  If management have done their job, they will sell this current tranche of shares at an appropriate valuation which gives great upside for buyers but value to current holders.  The downward spiral over the last few weeks has been on low volume and traders exiting losing positions, nothing to do with the fundamentals.

Once a deal is made with a strategic partner for significant equity stake, the finance risk will be removed and the share price should move up to reflect at least a sensible percentage of NPV ie > 50% which would be $400 million + MC

More than happy for people to pick this apart and disagree, as I said above, I'm writing here mostly for my own benefit and like to be kept honest if there are negatives I have missed.