If the prices stays where they are If they execute on time and on budget If the dilution is a minimal as suggested If the recoveries match the testwork If they manage to keep on track with the costs If the concentrate shipping costs and TC/RC's are reasonable and per the assumptions made
(*Im not being negative here, this is mining and most mining projects have at least a few issues. Its a good ore body that should technically perform under an experienced team based on the info provided DDOYD).
So if all of the above, then the MBA's would tell us the valuation should equal the NPV of AUD381 post tax. The 15% & 23% drop in Pb and Ag grades are (today) more than balanced out by a 7% and 75% higher Pb and Ag price against what was used in the 2019 FS.
By that argument the price would be up 231% up to 0.90. I am assuming the same NPV even though it should be a bit higher on the higher price assumptions and lower grade assumptions. But then again, this reasoning has already been baked in and we see the price is not flying up on the back of this news because we aren't there yet. Its gone up nicely, no doubt, but there are a lot of folks who are still unsure if they can execute, + the sad fact that this is and always will be a depleting asset, so it needs more blue sky to really rocket. The only blue sky is now the copper that has been announced, but I would not consider this in any assessment. They are building a Pb mine and need to keep the eye on that ball. As an operator I would nevertheless be excited about this and looking to see if I could somehow include it in the BP so long as it does not distract. As an operator I would also always under promise and over deliver, this way dealing with the curve balls anyone in this industry always gets on any mine. There are just so many variables to manage and this is why few actually get it right. Hopefully this is the case with Galena's management & the whole FS, all seems okayish so far.
So the share price is where it is now, and I would say that if all goes well the price would be at least above 0.45 once in production to be reasonably conservative. Would you be okay with that return? If so then the hard part is choosing when to sell with possible upside or disaster still to come....
Now if the company were to finally announce a production net revenue of AUD100M+ in the first year or two of commercial production the valuation could easily be closer to a dollar. But hey that's my opinion, just a humble mining engineer blabbing on about a stock in a market he knows little about, and we are still a very long 24 months away from production. Hence a good idea would be to check how the team did elsewhere before and get their sense on it by talking to them. Afterall, 85% of it is about the team.
I'm not a buyer, today...yet - I want to do a bit more DD first.
(20min delay)