Understand where you are coming from, but remember some Australian companies are now discounting less than 10%, because of where the long term bond rate is. Be mindful in the DRC the functional currency is US$ and in a CAPM model which informs your WACC the use of US variables makes the WACC itself low, so 13% - 15% in the DRC is well and truly above other WACCs out there. In Australia, a number of entities have A$ functional currencies and given our long term bondrate is higher than the US (it was last year when I did the calc) functional currency is also important in understanding differences.
In this post I yabbered how I calculated a WACC, deriving equity beta, with the assumption used based on Randogold is that it is 1.5, or another way to put it 50% more riskier than the average of the market etc etc which are the inputs to a WACC, and adding country risk which is very high when compared to Australian based miners (and yes I know AVZ is not mining but the discount rate in the DFS wouldbe based as if it is a miner) - Post #:
34527760 and Post #:
34529458 and below is the WACC calculation itself which is embedded in the two embedded posts I havelinked:
At the time of the post was looking at Randogold:
https://www.gurufocus.com/term/wacc...pital%2B%2528WACC%2529/Randgold Resources Ltd
https://seekingalpha.com/article/13...g-earnings-low-debt-and-a-121_00-price-target
All hypothetical, but the point of my post is sovereign risk alone does not explain the significant discount here. My view is i.) the market doesn't believe that AVZ will enter production by 2025 and ii.) missed timelines have had a huge impact here in addition to soverign risk. I also agree with the poster above the Chinese are now becoming a negative on SP because of teh games played (assuming there are games been played here), hence why in some earlier posts of mine I thought getting a player outside the Chinese might be a very worthwhile thing to do as well here.
A transport solution and positive DFS and Offtake will see a significant re rate here IMO
All IMO
