Of course, but please note that the "trainee" in my user name is...

Of course, but please note that the "trainee" in my user name is there for a reason

The announcement of the Nebari facility on 13 March, included the following statements:

"Nebari will receive 421 million warrants on drawdown of the US$20M and, if the US$10M tranche is drawn, a number of warrants equal to the Australian dollar equivalent of US$1.67M divided by a share price equal to a 30% premium to the then 10 day VWAP."

"The warrants will have a strike price equal to a 30% premium to the 10 day VWAP prior to issuance and expire after 36 months."

At the then share price (around 1.0-1.1 cents IIRC), MMI announced the NPV per share was 6.8 cents. More recently this has increased to 7.0 cents. There was also a statement back in March that this was better than the 4.1 cents NPV that would have resulted if MMI had raised the necessary capital by way of placement.

It is clear that MMI's calculation of 7.0 cents NPV must use the diluted number of shares on issue (i.e. factoring in the warrants to be issued under the financing facilities) and cannot be based on the number of shares currently in issue. As a matter of logic, if shares are being issued at a price below the undiluted NPV then the diluted NPV must be lower.

However, where it gets interesting is that the NPV is not a static number. It will change over time. Factors affecting NPV would include:

1. the exercise price of the warrants being based off MMI's share price being higher at the time of issue than when the facility was announced

2. changes to the underlying economic model (e.g. changes in the price received, the timing of shipments, the costs of operating the mine etc)

3. the passage of time – NPV calculations discount the value of future cash flows using an assumed interest rate. As time passes the time-based discount reduces, which means the NPV rises (all other things remaining constant which, of course, they won't)

4. changes to the interest rate used to discount future cash flows

I don't know about #4, but all of #1-3 have changed in MMI's favour since 13 March which means that the NPV should now be above the 6.8 cents benchmark which explains the more recent 7.0 cent NPV number from the company.

So basically, NPV is a complex moving target (way beyond my ability to calculate reliably). For the reasons given above, I expect the NPV to grow over time (assuming all the original assumptions remain valid). Given the short payback period on the mine expansion expenses, I would further assume that growth in NPV will be quite rapid but could be swamped by other factors.

Regardless of the details, an NPV of $405 MM v a market cap of $87 million suggests that the underlying value of the shares is multiples of the current share price – all we are discussing here is how much higher the share price should be from current levels.

Lastly, there is, of course, the non-zero possibility that the warrants are never exercised.