Oldgherkin,
But hang on - isn't that the job of management? ;-)
1. We invest in the shares and management's job is to invest in projects that have a higher return than the firm's cost of capital (plus a good margin of safety!). That will increase shareholder's value over time.
2. If we don't expect management to do that well (either through incompetence and/or agent-principal conflicts) then we are best to stay away.
3. I don't have a detailed knowledge of mine economics but broad brush...the Federation estimated reserve NSR is $A350/t (presentation released today).
Assume a mining and milling cost of say $150/t (Aurelia is aiming for lower) plus say $40/t sustaining capex and $40/t transport/royalties - gives a ball park $120/t operating cash profit.
If they can mine and process say 500kt p.a. (aim is 600kt) and that $NSR is correct across the whole resource (uncertain!!) that suggests circa $60m p.a. operating cash surplus.
But before management salaries, overheads, interest cost, tax and ongoing exploration/growth capex of course.
I could have this hopelessly wrong so please don't take as investment advice!
Very happy if you can correct those numbers as needed.
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