Too many factors to consider with this company. (but like with many in similar project development phase) 1.Execution risk (remains high), 2.Project financing (probably not a matter of if, but at what cost ie will it be Equity/Shares given away at a marked discount eg 18cents some time in Q3/4 CY2022, probably upwards of $200mil worth, including a rights issue for existing shareholders once FinalInvestmentDecision made) as well as the interest rate on all the Senior Debt (circa $200mil) will it be at 8%pa or something ludicrous like 15%pa. 3.When and if NdPr Offtake agreements are signed, and for how much of Nolans production, and at what pricing ie is some at a fixed contract eg $US60 and a higher% at spot ExChina prices (currently about $US75) and thus some exposure to potential upside in pricing if demand outstrips supply as ARUs glossies always seem to pint out. 4.AND THE BIG ONE, How big is this resource really? We are already very confident it can provide ore for 4,400,000 kilograms NdPr oxide pa for 38yrs+ (to produce EBITDA $377mil pa) but what if can be doubled to 8,800tpa because the resource is found to be MEGA. The EBITDA could hit $1bil pa. 5.Setting this company up for a takeover, if before construction starting then 0.30-0.40
IMHO it would have to be No.4 becoming a reality for this stock to hit anything over $2 (ie MC > $3 bil on current shares issued and if we the existing shareholders are not diluted any further). Realistically ARU could get to 0.80-$1 sometime when production becomes a reality, and there have been no disasters with the project, ie it has come in at/under budget, the resource is definitely proven and the large-scale benefaction plant is working without problems. I would be happy to see Offtake agreements happening within this next 6 months, with ASSOCIATED PROJECT FINANCING, will see the SP move to above 2021 highs ie over 0.30 and likely settle at 0.35-0.40 ie MC $600mil. FID and full project financing should see it move to 0.60 with ultimate project completion and production seeing 0.80-1.00 I'm sure other longterm ARU holders could come up with more variables to influence future SP/MC, but having held ARU for 10 years now, I think I have seen enough to know that there are easier places on the ASX to make money, BUT this resource is a globally-needed resource for the 2025-2050 era, the Aust Govt and other Western Govts know this, unfortunately it is not needed right NOW. China has control of 80% of global NdPr and have the IP/know how to control its supply/even its price for now. But as the demand for EVs, turbines and IT devices goes parabolic from 2025 to 2050, China will not be able to get its hands on enough NdPr to control the market anymore, and Western Govts do not want to rely on their supply of critical magnets coming from a less than friendly China, and will be looking for alternative reliable friendly supply chain like Australia/USA/Africa. I can easily see NdPr prices rising to over $US100kg sometime in 2030-2033. So doing the math 4.4milkg at $US75 margin = $US440 NPBT. With a projected mine life of 38+yrs even a very conservative PE ratio of 7 leads to a MC of $4bil ie $2.50 per share (undiluted 1.55bil shares currently) My advice consider this a longterm holding and you (and your grandchildren) will be dutifully rewarded. Apologies been away for a while from ARU posts on HC due to work commitments, doing 55 hrs a week vaccinating Australians against COVID19. Regards BBB (Yes I own six figure no of ARU shares, yes showing a reasonable profit at 0.17, only because I have participated in every single CR or SPP that ARU have had since 2011 incl 0.044, 0.08 and bought near CR prices when I needed to keep my holding from being diluted by brokers mates and so-called S&W investors. Yes it has become my largest $value holding in my portfolio) Addit: Disclosure I will probably lighten some of my exposure (15%) at around 0.24 hoping this might happen within the next 6 weeks "going by the charts" and the interest building from the shert-termers. And don't forget DYOR. !! A shout out to @Birchcorp@razzle7@Sunrayta@Poohbear@Bignuts77@spendthrift@tradeprofits@sledge52@RY22@acouch@whale1@frank1@Sarge33@doc70 even to @ausheds
ARU Price at posting:
17.0¢ Sentiment: Hold Disclosure: Held
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