Analysing the offer: Appian MAY fund to an extent that it will...

Analysing the offer: Appian MAY fund to an extent that it will hold 67.4% of Gorno.

- The first tranche is US$10 million for 29.9%, which places a value of US$33.4 million, or A$48.3 million on Altamin.
- Following a final investment decision in relation to the Gorno Project (i.e. all permits have been obtained and the feasibility study has given a positive conclusion), Appian has the right (i.e. not the obligation) to fund another US$55 million to bring its stake up to 67.4% placing a value on the JV company at US$96.4 million or A$139 million. This for a JV company with a ready to construct mine.
- The NPV8 of the pre-feasibility was US$211 million (A$305 million) assuming initial capex of US$114 million (A$165 million). The additional cash injection of Appian is however only US$55 million (A$79.4 million) leaving another US$59 million to be funded, or A$85.2 million.
- How this additional funding will be secured is open. It could be equity financing, but more probably loan financing.
- This would convert to an Enterprise Value of = 305 - 85 = A$220 million.
- With 32.6% (therefore loss of control) the existing shareholders in Altamin would have A$71.7 million in the JV Company. This compared to a market cap at A$0.095 of A$37.2 million.
- However:
1) feasibility studies almost invariably give higher capex and opex numbers reducing the NPV.
2) the investment decision is still very uncertain as the environmental approval is up in the air and the feasibility study still to be finalised.

- against that stands the possibility of further resource additions at Gorno and the other projects. Not that I hold much hope for Punta Corna. If an environmental permit is difficult for a past-producing mine such as Gorno, how difficult will it be for a project in a pristine area of the Italian Alps?

Anyway, I am still not sorry I sold out. The upside is too limited for the risk to the downside.
Good luck to you all.