What price would AKO be taken over? Some thoughts and numbers before you name your price.

This thread is in response to a question asked by @Burty85 (https://hotcopper.com.au/threads/akora-ako-vs-hawsons-hio.6687857/page-44?post_id=66040456) and the considered response from @fact.u.al (https://hotcopper.com.au/threads/akora-ako-vs-hawsons-hio.6687857/page-45?post_id=66042878) where the question was asked about "what price would AKO be taken over"

All information is as current as possible, and I will likely have to break this up into multiple posts in order to be easily consumed, and so I can take breaks between thoughts.

Before I get started on the numbers and justifications, it is important to understand the history of the company, and the structure of the ownership.

The history - https://www.akoravy.com/the-company

In short, the company has been around in its current form since 2009, and listed on the ASX in December 2020.

As per the most recent quarterly, the Directors holdings (both direct and indirect) are:
PG Bibby 1,933,659 shares or 2.68%
JM Madden 1,677,026 shares or 2.32%
MH Stirzaker 500,000 shares or 0.69%

This totals 4,110,685 shares or 5.69% of the company.

The market cap is $11.5m, which mean the total value of ALL OF THEIR SHARES is $657,195.

Between them, they would not have enough money to put a deposit on a "nice house" in a good suburb in Sydney or Melbourne.

I consider a nice house would cost at least $5m, and banks want you to have 20% deposit now a days, so you'd need $1m. On top of that, you would need to still make repayments on $4m, or $6k per week, or $25k per month or $300k per year.

So the questions to ask yourself are:

"Would you dedicate 14 years of your life, as well as cash investments for that sort of outcome?"

"Would you go to the hassle of listing a company on the ASX, and all of the compliance that is required for that sort of outcome?"

"Would you want to spend a career in an industry, working for some of the largest companies in the world, making other people rich, and to then come across one of the potentially best resources in the world, with an unknown but potentially significant amount of reserves for that sort of outcome?

The short answer is an emphatic "NO".

So the next question to answer is what would be the amount you would accept?

Paul and John have about 2.5% of the company each, or about $290k.

Is $2.9m enough? 10x. You could buy half a nice house. But you would still need money to pay your mortgage and live off. So probably not enough?

Additional dilution aside, this would require a $120m market cap (2.5% of $120m = $3m)

Is $29m enough? 100x. You could definitely buy a nice house, but not a trophy home. Depending on the size of your family, you could probably allow your kids and grand children to live comfortably, and for many people this would be "enough".

Additional dilution aside, this would require a $1.2B market cap (2.5% of $1.2B = $30m)

People don't list companies on the ASX to live comfortably and have enough.

The biggest unknown right now is how much ore / upside there is.

We know the following
The strike at Bekispoa is about 6kms long.
We know that AKO have drilled 30% of Bekisopa, or about 2kms of strike.
We know that 30% of resource is about 200mt of high grade Iron Ore.
We know that the company was targeting 100mt - 150mt, so they outperformed the prospectus by at least 25%
We know that at Bekisopa the district (including Satrokala and other unnamed anmoalies) has about 40kms of strike, which means
We have drilled about 5% of the 40km strike, which means that if these numbers remain consistent (which they won't, could go up or down)
We have the potential for 4,000mt (or 4 billion) tonnes of iron ore at Bekisopa the district.
We know we currently have a 30% yield, which means
We may have up to 1.2 billion tonnes of very high grade iron ore concentrate in the ground.
We know that at a 20mt per year production rate it would take 60 years to mine 4B tonnes of ore (or 1.2B tonnes of concentrate).
We know that 62% iron ore is $124 USD/t, and this means that if we were to produce benchmark grade only that 1,200,000,000 X $124 = $148.8 BILLION dollars over the 60 year life of mine
We know a 30% IRR means there is a shit ton of money to be made if the resources are even 1/4 this potential size.
We know that the Bekispoa resource is capable of producing at least 64% graded material with minimal processing, or 68%+ material when using Davis Tube recovery.
We know that Paul and John are frugal in their spending, and mindful of dilution
We also know we have ~73m shares on issue
We know that a "low cost DSO starter to self fund the major mine development" is the preferred path forward.
We know that unless things go wrong, we should have less than 300m shares on issue by the time we go to DSO production (I actually think it could be as low as 150m shares, but let's go with 300m shares).
We know that size isn't everything.
We know that FMG have 3 BILLION shares on issue, and a $68 BILLION market cap.
We know that FMG needed to build rail and ports to be able to move the tonnages to make the project viable.
We know FMG are producing low grade ore, and are offering a DISCOUNT of $30/t on the benchmark 62% price (screenshot time)


We know that FMG are excited by the high grade iron ore story because they dedicated a whole section in their quarterly to their Iron Bridge operation


We know that AKO will be more profitable on a per share basis because there will simply be at least 10x less shares.
We know that low shares on issue and high EPS and DPS generally results in a much higher share price.
We know this is grossly undervalued
We also know it will take 10 - 15 years to get to 20mt production of 68% - 70% DRI product - which is 1% to 3% more pure than what is being produced at Iron Bridge
We know that in 2003 (20 years ago, the FMG share price was $0.05c

We also know that if you had 100k shares @ $0.05c for a total consideration of $5,000 in FMG in 2003 and held until today your shares would be worth $2.2m and you would be receiving $200k in dividends



We know these calculations don't include Tratramarina or Ambodilafa.

Finally...
We also know there is an awful lot that needs to go right for all of this to happen, but being even 10% correct would be beyond life changing, because it would be generational family wealth.

But the question remains...

As someone who has invested years of your life into proving up, at what price would you sell all of this potential for?

For me, it wouldn't be $3m, or even $30m