Based on the PFS, fair value today, before anything else is done is 17c IMO IMO IMO, using 2.2 billion shared (heads and options). A bit conservative, but that is just a view I have. To estimate fair value, I worked on an assumption, after revisiting an earlier post of mine, as to what someone would pay to achieve a 15% post tax IRR on the current PFS targets. Obviously means a lot of upside here before construction even starts, especially if the DFS has a higher production target than the PFS. This might explain some of the trendline up, but obviously Offtakes are a key to getting to production in 2022 etc.
Certainly not advocating a TO, just using the current PFS parametres to work out a payment structure on the PFS assumption, as that becomes an upfront spend in a IRR model - here works out at an upfront payment added to the capex spends of the PFS in my previous post of some $370 million. The 'payment' works to reduce pre tax NPV and post tax NPV from where they actually are in the PFS, to achieve the 15% post tax IRR.
Obviously in a real life scenario, TO would also include expansion plans etc etc and that adds premiums SP prices etc etc. So if the DFS has higher production targets than the PFS, and assuming the IRR comes in close to the 175% in the PFS, you would expect SP to further increase before first production commences etc etc. As you get closer to production then SP IMO switches from an NPV based fair value equation approach IMO to one better reflecting EPS and P/E ratios (and in time dividend streams). That is the benefit of getting this to mining, especially if mining achieves the DFS targets etc etc. In any event it gives a guide as to what fair value may be today IMO IMO IMO IMO from probably the way a banker
may look at it.
Yes I am probably been too conservative, but thought would post this for an underlying base to fair value today calculations. Whether the SP moves there before the DFS is another story and only time will tell, but suspect getting Offtakes in the near future to enshrine a 2022 production start date will certainly IMO increase the probability of getting there btw.
At any point in time when in production SP is also a function of future outlook, plus current profitability at that point in time IMO. There are enough entities on the ASX that are currently in losses that have market caps in excess of $500 million, which suggests that the SP there is also reflecting future earnings potential for those companies in production. So in production I would assume the SP of ADN would incorporate future earnings potential of say up to three to five years out at any point in time during a production year.
Hoping the DFS provides enough data to try and duplicate their modelling for achieving the IRRs etc etc
All IMO
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