The only time to compare $1.50 and $3 is if you know you're...

The only time to compare $1.50 and $3 is if you know you're doing a buy-back (as opposed to re-investing in growth to grow EPS), and you're worried about the timing (and happy to time the market). If people are so sure about the SP rising 100% and the company missing out on the opportunity to buy-back cheap, then there are also 2 options:

1. The company does a buy-back, losing the cash and taking on risk (higher leverage).
2. The shareholder takes out a loan, adds to their position, and takes on the risk (higher leverage).


As of today, we can predict the EPS/dividends for the 2 buy-back scenarios (the company doing the buy-back):
Scenario 1. No Buyback scenario: We're a company with cash of X and shares of X.
Scenario 2. 10% Buyback scenario: We're a company with cash of X minus $38m, and shares on issue of X-10%. Those are quite accurate scenario numbers as of today, for a large buy-back (they're generous numbers actually, because they will never get that volume of shares without driving up the SP, so they'd realistically get <10% for $38m). So 90% the number of shares on issue to divide the dividends by, but also having $38m less cash to grow profits - so not necessarily coming out ahead.

Then you'll know how good of an idea a buy-back is.

Scenario 1: is where we're heading, or a tiny buy-back is almost equivalent to this scenario anyway, with some potential benefit of protection from hostile takeover.
Scenario 2: I'd call it the more risky scenario, and not really better. We'd be tight on cash for an additional year, unable to grow as desired, delaying growth by likely 1 year (long enough for NPAT to bring in $38m to offset the cash outflow). But we'd have 10% less shares on issue - the benefit.




Justifying the 'likely 1 year' number.


I'd estimate that re-investing $38m can grow EPS by >11.1%. Meaning it's superior to buying back 10% for $38m, which delivers 11.1% higher dividends per share (1 / 0.9).

For re-investment (with no buy-back) to deliver EPS growth of >11.1% it would have to bring NPAT from $30 to $34m or $70 to $78m, depending on the year.

Though if we're now legitimately in a stronger position than pre-closure (thanks to Quartz, but A has been stripped and royalties raised), then it would have to grow profit from $100m to $111m to beat the 10% buy-back.

Can $38m of reinvestment grow profit by that much? Probably. Being able to mix-in B ore with Quartz and A, for example. Or expanding the pits. Or both. Or solar plant too.