Ann: Ceasing to be a substantial holder, page-11

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Lenny08

660 Posts.

133

23/06/23

11:33

Post #: 68434942
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Originally posted by Arh0070: ↑

As always a good analysis.
there are several important points.
1)Deg has essentially been in a trading range for 3 years ,buy and hold has not made much money .astute traders will have made more by buying in the 1$ to 1.20 range and selling in the 1.30-1.50 range.In my opinion this will continue for the next 5 years as the market value of a company with 500,000 ounce production like Deg is proposing is about 3-3.5 billion.They will need to spend 1 billion plus to get the plant up and running and 5 years to get it making money .Current market value is 2 billion so potential future return over next 5 years in minimal.
2) this deal with NVO is a great deal in that nvo is priced at 24-25 cents a share and there are something like250 million shares out ,current market value is less than a hundred million.NVO has a huge land package so if DEGS exploration team finds another Malina on nvo property that would be worth say 500million(for 50%) and thus nvo share price could escalate 4-5 times if that comes to pass.
The impact on DEG is less as its currently valued at 2 billion ,its no surprise that market reaction is a yawn as its a transaction worth about 1% of Degs current market value.If they discover another Malina ,it will likely have an impact of say 50%on degs share price but nowhere near the impact on NVO.
3)this is a good transaction for DEG but it reveals their mindset that they still remain basically an explorer company(which they are very good at I might add).
4) DEGhave spent some of their reserves on this transaction so it means another capital raise is coming sooner rather than later.
5)I have noticed that on other comparable big projects worldwide that feasibility studies are using 25% as contingency fees for inflation and supply chain issues.
So I have made a small bet on Novo principally because I think DEG has a superb track record of finding gold because of its geologists and drillers who have had such success in the Pilbara .Hopefully they can repeat on nvo land .Time will tell,its worth a spec.

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Sounds like a great deal by the DEG team.
As you highlight, when they build up a decent reserve, while Novo share may go up 4-5 times, DEGs cut will be circa $500m based on your post. Your biggest concern has been the cost of the plant for DEG, but based on this, they will pay for half the plant ($500m) for only a $25m investment?! Pretty good going

DEG Price at posting: $1.31 Sentiment: Buy Disclosure: Held
16 Upvote

0 Great analysis

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Ann: Ceasing to be a substantial holder, page-11

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Ann: Ceasing to be a substantial holder, page-11

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