It seems EXU also subscribes to RMS conclusions that some parts of the resource were not possible to be mined economically and the best way to use the resource was to cherry pick the high grades so even after adding 20koz from Mace the total gold has gone down.
Why are they allowed to use a 8% discount rate instead of at least 10-12% discount rate for a feasibility study (for example wasn't the NBN payment to Telstra discounted at 10%)? I think that is a mistake. Even allowing for this the Post tax NPV is only $103M or 21c per share without financing costs. If it was possible to get a bank loan which seems unlikely at this value, say 3 years 10% then financing cost is about $30M + expenses. Otherwise absolute best case cap raise at 20c (again not really going to happen if ALK was only willing to pay 12c if given free options) then that is another 500M share dilution. More realistic 10-12c cap raise is another 1000M shares .... Share raising admittedly adds the value of the capital raised back into the NPV calculation but this does not improve much under such heavy dilution.
Now I realise this is an EXU thread and I do not mean to spam for RMS, you can see I am equally sceptical on this deal for RMS. The facts are EXU on its own has a potentially valuable resource although I think both EXU and RMS agree it requires more drilling and exploration to prove for a BFS. You have potential but also risk, and in the near term without RMS I think all would agree the EXU share price is most likely drop before it gets better. The RMS offer mainly offers you certainty, significantly reducing the risk with a return of still maybe +/- 30% of what you get from EXU alone. It is not like the difference between winning 1st and second prize on the lottery as some on both sides are saying.
You can not take the NPV calculated here as a price target, it is at best an upper limit. In addition it here EXU use an optimistic discount rate of 8% (If you don't understand this then for example 10% was used even for Telstra's government guaranteed NBN payments and 10-12% fairer for a gold mine feasibility). NPV is not accounting for risk, which the share price and target does.
But ... even with these considerations, this feasibility study update does nothing to make the RMS offer look bad, it confirms a number of things already noted by RMS and is broadly in line with their offer.
