Good point mate, there are ancillary benefits to exploiting the underground avenue. I said last night that carltons could produce approx 85 mil NPV, but I failed to include the initial capital costs in that statement. After including them, it came out between 30-40mil NPV and that was at a 10% discount rate. For those not familiar with the NPV calcs, the net idea is that any project with a positive NPV (greater than $1) should be pursued by the business (because it means it is profitable whilst accounting for the time value of money). The discount rate is the risk free rate (effectively the government bond rate) plus a risk premium - given the really poor state of interest rates at the moment, doing an assessment against 10% and getting a positive NPV would suggest that the project should be pursued. This means that whilst Carltons doesn’t look like it will have the same return that BP33 and Grants will have, CXO will still be making money by exploiting it and by doing this it can operate PROFITABLY for a least another few years whilst they develop other resources.
Grants and BP33 will keep us busy for 5-6 years (assuming the additional resources are included) at high profitability, and then carltons for longer at lower profitability. This gives us plenty of time to make some good profits and find more resources......a good future noting that the spot price is expected to rise after we hit production in 21/22.
I would advise not getting too distracted by some of the negative comments on the forum lately. It is simple in my mind, if the numbers stack up for you (they do for me) then invest or stay invested, if they don’t for you, then sell/stay out. Investing is a personal game, and it has to work for you. Others have different assessment paradigms which can be based on emotions but I tend to rest on the numbers and the logic.
Just for info, the NPV that I got for Grants and BP33 alone was about 200m - This is up from 114m from the DFS just last year.
CXO Price at posting:
4.4¢ Sentiment: Buy Disclosure: Held
