I'm here for a proper discussion - just bear in mind in your first reply to me you labelled me a 'troll'. I think my opening critique on this thread is fair: to re-visit a study and increase the base case commodity price, but leave the discount rate unchanged (when NPV8 is unrealistic) is pretty ordinary. If someone is going to claim that a junior can finance US$360M capex (currently A$546M) via a combination of equity, prepaid offtake and debt financing, then it's probably important to have some pretty concrete examples of precedence, not just a wild hope that "this time it's different" (four quite ruinous words to investors). So in return, let me give you some concrete recent examples of why using NPV8 for an African uranium project is unrealistic:
- Jervois Global raised a US$100M Nordic bond in 2022 to build a cobalt mine in the US (noting cobalt is also a very volatile commodity) and their coupon rate was 12.5%, payable in six-monthly instalments (as an aside, this debt is now probably going to send them bust)
- Bowen Coking Coal have around US$70M debt from Taurus to build a coking coal mine in Australia (a fairly stable commodity) and their interest rate is 10% plus 1% royalties (this debt has also proved very burdensome to them and they've had to do multiple equity raises to prop up the balance sheet)
- Mineral Resources recently issued $1.1B in unsecured notes (unsecured, yes, but they are a giant) for working capital for their Australian projects and the notes are paying 9.25% per annum
- There are abundant examples of other debt deals being priced at SOFR +5-6%, and SOFR is currently 5.32% so that would be interest rates of 10-11%
- Gold development projects tend to get lower rates because these are lower risk and less capital intensive. Tietto Minerals in Cote d'Ivoire had a US$25M working capital facility with Coris Bank that was paying 8% per annum but that was because they were through the construction phase and had cashflow from operations coming in. They initially went to Taurus for debt to build the project but were knocked back (read: quoted too high an interest rate) so ended up having to raise a lot of equity.
I agree that when it comes to uranium jurisdictions, Namibia would be considered Tier 1. But bear in mind that bankers don't always think the same way that investors and company MD's do. It's still Africa, with the associated risks. All these juniors using an 8% discount rate are absolutely dreaming when projects in true 'Tier 1' jurisdictions like US and Australia are already costing north of 9-10%. Also, if you've ever played around with an NPV model, then you'd know that it isn't just "a few percent". Increasing a discount rate from 8% to 10% can have a significant impact on overall project NPV because that's the figure you discount future cashflows by each year. I think JB talks a good game but I'd be very surprised if Tumas or Bannerman's Etango-8 ever attract funding. In the long run, that's positive for the uranium supply/demand situation though. If you're just trading the spikes, whatever. But if you're taking long term positions, I think you have to pick your companies pretty carefully... Cheers
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