We retain our Buy for GMM. Our base case valuation for GMM, pre-merger is 81cps. Our spot price valuation (US$750/t spodumene) price target is $1.21.
We include low value for James Bay ($45m base, $100m spot).
We do not have a formal Sal De Vida model, the logic presented in our report (ORE comparison, old DFS estimates) shows it could have significant value.
We estimate that every extra A$100m of value attributed to Sal De Vida adds ~9cps to GMM (which is 5.5cps in GXY terms), if the merger completes.
Hence, GMM either with or without merger, appears good value.
In my opinion, this is only where things start getting really interesting for GMM shareholders. If the merger is successful, expect a very large rerate of the combined companies on size, scale and the revaluation of Sal De Vida and James Bay. This is not factoring any upside in next year’s spodumene offtake pricing due later this year.
Looking at it simply you can argue that Merge Co. will have assets under management equally the combined value of ORE, PLS and MNT, on current share prices this is nearly $2b in market cap. On current share prices, GMM and GXY has a combined market cap of $870m.
GMM Price at posting:
77.0¢ Sentiment: Buy Disclosure: Held
