BMN (ASX) Ann: Trading Halt

Originally posted by James7821: ↑

Yep. You can't knock sense into these people. And if you try, they come back with more FUTURE potentials to justify CURRENT value.

Remind them what a fair discount rate should be for future cash flows on a project not yet developed, funded, or signed off. We're looking at a 20%+ annual discount rate. So even if you put in a stupid figure like 60,70 or $80 US per lb Uranium (It's never settled at this price, ever), then with a genuine discount rate it STILL wouldn't be worth the risk for an investor. There's a reason why the general rule of thumb before sign off for development, a project is about trading at around 10% of its NPV across most of the resource sector. This is it.

Why would anyone want to invest in a company that is trading at say 80% 100% or even 120% of its NPV which ALSO assumes a 20-50% uplift in sale prices vs spot, compared to other resource developers priced at 10% of their NPV, usually based on a conservative spot sales price?

The only place to be in the Uranium space right now is in low cap explorers. You get much better upside leverage in the long run.

Most people will talk about spot vs long term contracts all wrong. They don't understand it. Yes project assumptions are based on long term contracts (90%+ of all Uranium market trading is traded in long term contracts), but ask yourself, why would any buyer WANT to lock in a substantially higher priced long term contract vs the spot?

It's never made sense, right? Well that's because the answer is they don't. They never want to. They only ever do it when there's a high probability of a supply squeeze when they need to maintain input (overfeeding vs underfeeding issues - which destroys margins!). And because of this, you need to look at the long term contracts as a watermark of the spot market rather than a reflection of the sustainable long term supply or demand forces. The Uranium market is full of secondary selling and buying, traders just playing the arbitrage because of these issues there is a penny to be made. The long term contracts are not just "forward prices" - they are NOT a lead indicator - the very active secondary market makes sure of this.

And for this reason, hopeful developers will be looking for their OWN long term off-take contracts (which need to be VERY generous and cover most of their supply because gross margins of most projects I've seen so far are really lousy). So why be in the developers in the meantime? And that's just to justify their market caps against project values. What upside is there really? Did BOE get rated multi-bags on its own development news? Why not?

This is why developers remain a lousy prospect right now. It's the tiny cap explorers which are more attractive.

And anyone who wants to rebut me for the sake of it: Know that I'm bullish on Uranium, and if Uranium does rise I know Bannerman will ride the tide.

Good luck to all holders.

Expand

Excellent post! Anyone wondering why LOT, PEN and now BMN have all disappointed with their DFS releases (just as I suspect DYL will in Feb 23), should carefully read this several times.

No.	Vol.	Price($)
2	24450	$3.27

No.

Vol.

Price($)

24450

$3.27

Price($)	Vol.	No.
$3.28	20000	1

Price($)

Vol.

No.

$3.28

20000

No.	Vol.	Price($)
2	24450	3.270
5	17450	3.260
7	23675	3.250
2	2500	3.240
2	9500	3.230

No.

Vol.

Price($)

24450

3.270

17450

3.260

23675

3.250

2500

3.240

9500

3.230

Price($)	Vol.	No.
3.280	20000	1
3.420	11983	2
3.450	2000	1
3.540	280	1
3.550	600	1

Price($)

Vol.

No.

3.280

20000

3.420

11983

3.450

2000

3.540

280

3.550

600

(20min delay)
Last $3.27		Change -0.310(8.66%)		Mkt cap ! $499.8M

Open	High	Low	Value	Volume
$3.30	$3.40	$3.23	$6.799M	2.065M

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