FWIW and AIMO.
Apologies in advance for long post.
1) Since the 17/6/22 trading halt ann, the financial "hole" has gotten bigger. POG at 17/6/22 was US$1839.60, at 22/9/22 US$1671.38, a drop of US$168.22. At 100kozpa gold production that represents a drop of US$16,822,000pa.
Originally FFX was working towards $1124/oz AISC in the longer term, but I also have in my notes a figure of $1394/oz with a note of "2022/23", (didn't note where this figure was from probably a presentation). Using this for the sake of this exercise, AISC has increased around US$81. At 100kozpa that represents ~US$8,100,000.
At current exchange rate of ~0.66 that totals around A$37,760,606 extra needed beyond what I previously had expected. I (and I expect equity funding participants) need to trust this won't get any higher, i.e. at US$1475 AISC has peaked and also that POG has bottomed.
2) Current value of LLL holding at LLL SP of 75.5cps based on 210.9M shares equals around (from FFX own preso 22/9) A$159M, or ~13.5 cps. After dilution per Recap Package, this would be ~4.7cps. My estimated valuation for Morilla post dilution and assuming 100kozpa gold @ US$1650/oz and PE of 6, is ~4.5cps, a total of say 9.2cps. At this figure, I can see why the equity funding participants would say yes. At PE of 3 it's ~2.2cps for a total of ~6.9cps.
3) I've seen HC posts along the line of shutdown Morilla and distribute LLL shares to SH's and so on. Given the low likelihood of that happening, I thought I'd look at a different angle. How much would POG need to be to put us at the same pre dilution value for the LLL holding?
My estimate came out around US$1812/oz.
4) There was also mention on HC of 40cps future value of the LLL holding, and it "guaranteeing" a profitable exit. What would POG have to be to "match" that scenario?
First of all, 40cps value of the LLL holding would require an LLL SP of ~A$2.24, my assumption would be that this would not be realised until Goulamina gets closer to completion, at least say late 2023. So conservatively an 18 month timeframe. Recent broker valuations of LLL were ~$1.85-1.90, so maybe use $2 PS for the exercise, which would make the (pre dilution) value of the LLL holding ~35.7cps.To achieve the equivalent of this, post dilution, would need LLL at $2ps and POG would need to reach ~US$2380/oz over say the next 18 months.
5) What would LLL SP need to be to achieve equivalent of what US$2380/oz POG would do? If POG stayed at $1650/oz, it would need to be ~$5ps, something I can't foresee, and not for at least 2-3 years. If POG did make it back to ~US$1800/oz, LLL would need to reach $4.35ps and so on.
So for me to decide to hold or sell (no spare funds to buy ATM) comes down to
A) Looking to see FFX 9-10cps in the short term, post recapitalisation (otherwise why are equity funders putting in @6cps?).
B) POG dropped ~US$340 in around 6 months, can it rally ~US$141 in the next 3-6 months? If I believe this is possible and have faith in the US$1475 AISC, then it is a hold medium term.
C) Can POG get to US$2380/oz (seems highly unlikely) and LLL $2ps in the next 12-18 months? This is a much bigger ask, but this is a long term scenario, so I can defer this decision until I see how B) pans out, along with LLL SP.
For context POG info from https://www.goldprice.org/gold-price-chart.html
5/3/20 US$1666.40/oz "pre pandemic high"
19/3/20 US$1478.60/oz "pandemic low".
7/3/22 US$1998.60/oz ATH?
(20min delay)