talbot group average buy in, page-25

DTRAD

Your post is very insighful and the ideas behind it make very good commercial sense.

Realistically for the project to get off the ground there is some serious financing required. However is saying that it may well be that a major is happy to pay a significant premium because they know what they are getting and what the cost of getting that to their mills will be.

Put it this way I believe an offer of between 50-75c would go very close to getting a deal over the line. Or in real terms a 1.1-1.5 billion dollar upfront payment.

The point being that if a Tata or Mital take over the project they will not have too much difficulty raising debt as required in the medium term. The project has an IRR of 20% ungeared so with say 50 - 70% debt in it the equity IRR would be close to 30%. In anyones book that is amazing.

KT with an average buy of lets say 20c would make a cool 150 - 200 mill+ the only people who would miss out would be a limited few in above say 60c who did not do any averaging down.

From a commercial perspective i think you would get a vast majority to accept the offer and it makes good commercial sense for the majors to secure a strategic long term resource. The savings they would make in freeing up their supply over the long term would far outweigh the initial equity outlay.

Anyway food for thought we are still at 12.5c but I tell you what an offer north of 50c would certainly get a few interested.