I originally said on HC that I thought AZY should let Rio go to 75%. I have poured over the data and I have come to the conclusion that I was wrong. If AZY can fund the exploration and resource development work to keep 35% then they should.
There are many good reasons for this that have been put forward on this thread, for example:
- AZY will have considerable amounts of information on exploration and the Calibre/Magnum resource upgrade that is not yet public. This is informing their view that the project is undervalued by the market and the JV expenditure terms.
- The prospects at Rimfire, Boxer and others are all potential game changers. We are so close to finding out if we have a whole new deposit or two.
- If the Calibre/Magnum deposits are drilled out and the hot exploration prospects are given a decent exploration programme then AZY and the market will have a more accurate view on the true worth of the stake in the Citadel JV. Suffice to say it is likely to be going up not down.
- If the copper price increases as Goldman Sachs have forecast then the value of the deposits will increase. Gold price increases likewise.
- Calibre/Magnum have considerably more metal value per tonne than Winu and Rio's action indicate that they anticipate a stronger investment case for Calibre/Magnum than Winu at this stage.
- By keeping the 35% until the full or true value is better known then AZY is in a better position to negotiate with Rio over the mine development phase. Who knows, AZY may need to give up some or all of that 10% to fund mine development.
At this stage in the copper and gold price cycle perhaps they need to bite off as much as they can and chew like crazy.
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