Q) Do we now have to wait for commercial lending approval before...

Q) Do we now have to wait for commercial lending approval before we re-rate to $1?

In theory each milestone achieved is one less risk factor, some milestones de-risk an outcome more than others. I believe the announcement that NAIF is onboard for a quantum of $160m removes about 70% of the financing risk, commercial funding removes the remainder of the funding risk. At this stage you'd think funding risk is the major obstacle to a final investment decision. And given that Management have already started spending large amounts of money on early works, employing staff and authorising GRES to commence ahead of FID, you'd have to say the internal view is optimistic that all obstacles to FID are achievable.

You wouldn't expect the sp to trade at theoretical fair value* when there are still risks to FID eventuating (eg commercial finance completion). And similarly, as each risk to FID is removed you'd expect the gap between the previous trading range and theoretical fair value to close. So in practice, given how things are unfolding, you'd expect a stepping up in the trading ranges as each risk factor is removed., which is what were seeing.

As I stated earlier, my view is that this de-risking event could justify an sp of circa $0.75 - $0.85, with it moving to $0.90 - $1 on commercial funding completion, and then $1+ post FID, closing the gap to $2 as each construction and commissioning milestones are crossed.

hope this helps.


* in this case I'm suggesting a theoretical fair value of $1+ at FID, which is a hefty discount to a $2+ theoretical fair value at commencement of production