When an asset has a known terminal date (in contrast to say Microsoft which theoretically has cash flows extending out indefinitely) my personal approach is just to map out each of the years.
Putting together a rough and ready model which assumes $110m FCF for 17 years, with a WACC of 15%, that produces ~AUD$500m value for Tiris, which is not too different from the other valuations floating around:
Could probably tune that to get a more accurate result, but I don't think that's the main game. Why? Currently, the share price is trading at discount to fair value of around 75%.
That's not the market saying "Yes we believe Tiris will get to production but we're worried that FCF will only be $30m, not $110m".
Rather, that's the market saying "It's possible that Tiris will get to production but I think there's a 75% chance it won't".
If you believed that Tiris had a 75% chance of failure, then the current price is correct. Not too long ago, you could have made the argument that 75% right.
Reviewing the history since re-listing, back in October 2021 Aura was stating 18 months to production i.e. production in first half of 2023:
https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02432603-3A577692
Since then, there were a bunch of delays, communications weren't as transparent as they could have been (which always makes the market nervous) and one could imagine lots of scenarios where the company might just run out of money and never get to the finish line.
But since Andrew Grove took over I've seen a real turnaround in how the company is performing. Looking at his work history, I think he comes with the full package:
https://www.linkedin.com/in/andrew-grove-17491a30/details/experience/- Bachelors degree with geology major, Masters Mineral Economics
- Not just mining managerial experience, but geological experience, plus deep finance experience from Macquarie
- Previous exit at Chesser (one option for Aura if the road to production experiences further hiccups)
- Most importantly, building up a good track record of consistent positive updates to the market showing that things are back on track
The cap raise introduced a lot of short term gyrations in the share price, which I largely ignore. The main question I keep coming back to is "Is this a project that has a high probability of failure" (because if Tiris goes into production, there is no way the share price sits at current levels)
Under previous management, there's every chance I'd have hopped off the train by now. But Mr Grove is delivering and so long as the announcements keep showing things are on track, I have every expectation that the share price will converge toward fair value.
(20min delay)