@Scarpa ........."The NPV calculation been refereed to was a valuation and IMO is not what you and others think it is. It is a valuation simply to appease the ASX that the purchase price it pays for its 50% stake is appropriate. It doesn't include its long term strategy IMO - Refer: Post #:
38289447 The Prospectus will need to give the true NPV available"
The NPV in the MET report is the only indication we currently have about the operation of the plant using 3rd party ore.
There are no other numbers anywhere from the company that show any indication of any profit that this operation could have.
It is the only number we can use because it is the only number available. The METS report specifically mentioned that the numbers used for the NPV were provided by WFE.
When/If a prospectus comes out, the NPV for the operation of using 3rd party ore is the only number the company can use. Even if the model the company wants to use is it's own ore in the future, the simple fact of only having exploration tenements and no JORC defined resource, means they cannot include their own mining hope/wish in any numbers in the prospectus.
It has been a year since the company started this process, yet there are no indications from WFE about the potential profitability of this operation, except for that NPV number in the METS report.
As it is the only number so far produced, and it came from WFE, then until WFE (or better in Independent Expert), comes up with a different one, it is the ONLY number we have to use. Even then we still do not know the parameters that were used to get that number!! To me the sales price used is crucial, along with input costs, processing costs and discount rate used.
Apart from that one number, WFE have failed to show that this operation is capable of making a profit.
Last year when the price of cobalt was high and there was hype in the market around all cobalt plays the concept looked exciting. The hype has now left, and the cobalt price 1/3 of what it was.
I have NEVER stated this operation would no make a profit, nor have I said they would go bust, despite what a lot of posters 'think' I have said. (For those that don't want to believe this, before going off the cuff, FIND one post where I have EVER stated either, to prove your point.)
For me, this and any other operation comes down to the numbers. A long time ago I stopped trusting numbers that came out in studies unless I could verify them myself. For example PLS in their DFS used something like $US66/lb for tantalum prices, despite PLS increasing world supply by 27% for that niche market. The price will obviously go down a long way with that much extra product dumped on the market, so I used my own numbers in that case to get my valuation.
Same goes for another lithium company that somehow has a transport cost nearly 1/2 of what every other mine claims are the costs. I use my own numbers to adjust the company metrics to fit reality.
For WFE, we simply don't have any numbers that show the operation can be profitable, except for the NPV from the METS report. People that have been claiming huge multiples of the SP upon opening are IMHO simply deluding themselves.
@Scarpa ....."Ozblue, can you see a scenario where WFE will succeed from this deal?"
It depends on what you mean by succeed??
If we assume the company is going to make a profit/cashflow from the operation at current prices, then yes the company will have succeeded, however the Market Cap will probably reflect the profitability of the operation. If cashflow was only $2-3M at current prices, then the company would be expected to have a Market Cap of $20-30M, with a huge variation from there depending on what the exploration tenements show upon drilling.
Current Market Cap at 2.4c/sh, and including all ITM options and 'performance rights' comes to ~$A66M. If we assume the prospectus/cap raise is as stated, that adds another ~700M shares, just to buy into the JV, so Market Cap goes to ~$A83M.
Given the only number we know is the NPV of $US108M from the METS report for 100% of the operation, which means $US54M for WFE's 50% of the JV, then the current Market Cap does not show any profit for those that were to purchase shares at current price.
This is all before WFE somehow raise the extra $US10M (estimate) from the METS report to get the plant to fully operating.
To summarize the above point, if the current Market Cap was $A10M with the NPV of $US54M for WFE's 50% then yes, it would look good as an investment opportunity (provided the numbers in the NPV stood up to scrutiny). At current Market Cap with assumed successful Prospectus/Cap raise, of $A83M, the investment opportunity looks poor.
( A quick look at the recent SS of AVZ shows a NPV of $US2.63B, so you would expect with a Market Cap of only $A120M it would be a bargain, yet the share price fell back to a Market Cap of $A100M).
If a company that has a Market cap of only 4% of NPV FALLS after the announcement, what do people expect a company that has a Market Cap of 105% of NPV to do??It is blindingly obvious to me!!
The prospectus does not have to include any forward looking numbers at all, but from an investors perspective, what is there then to go on to encourage investment?? Faith??
If we assume the prospectus does have forward looking statements from Independent Experts (the requirements for a prospectus if those numbers are to be included), then I would want the NPV to be well above ( double to triple) existing Market Cap to consider this (or any other) investment. I would also have a careful look at the numbers behind the NVP to make sure they agree with current reality (using current cobalt price for instance).
For the exploration tenements and companies intention to mine them, I would put only a value of the $US1.2M cost on them. There is no resource, so they are simply tenements until proven otherwise.
I don't believe in free lunches, if these tenements had such a great potential, then I don't believe the existing owner would have been prepared to part with them for just $US1.2M last year at the height of the cobalt boom/hype.
If they had such great prospects, recognised by geologists, then surely the owner could have sold them to an existing cobalt miner/processor for many multiples of this price.
I therefore take them as just exploration tenements until proven to have a resource.
IMHO WFE have had a year to prove up the concept, yet just fluffed around the edges as far as I can tell. They have had plenty of time to get Independent Experts to write reports on all aspects of this potential operation, from researching the viability of supply contracts, to a report on all the costings and sales of the operation. All of which would have passed the ASX requirements with flying colours.
Why haven't they done any of this??
I've been saying for many months that this would never have gone into suspension if the company had just gone about this in the traditional manner of doing a feasibility study first, and raised cash last year to do the study while hype was high. If all had gone well in such study, then WFE would have remained trading, and more than likely be operating a cobalt processing facility by now.
All IMHO etc etc........
