Excellent post, TH. Thanks kindly for sharing.
I've assumed an average interest rate of 8% across the entire debt schedule. That's about a 3.6% premium to the current one month USD LIBOR rate. Is that a good ball park figure to pull out of the air to use for some conservative calculations?
In Australia, the rate used will be:
BBSY + margin.
And it is anyone’s guess what the margin will be.
BBSW (5 year) = 3.88% + 5 basis points = 3.93% BBSY.
But, if banks are currently paying 150 basis points above the BBSW then:
5.38% + 5 basis points = 5.43% BBSY
BBSY (5.43%) + margin (assume 360 basis points) = 9.03%.
If the margin is higher (say 450 basis points) = 9.93% (round up to 10%).
If you wanted to be more conservative, try putting 10% into your spreadsheet.
I’d be absolutely stoked if Baz and Co could pull debt off at an interest rate less than 10%.
But, to be fair (less conservative) the other way, I wouldn’t keep the copper price fixed in perpetuity at a price of A$12,294.
Goldman (Dec 2022) increased their average price forecast to US$12,000t in 2024. BofA see this being hit earlier. This is due to forecasted supply deficits. Cyprium won’t be producing until 2024, so there is plenty of time for the Cu price to reflect supply deficits.
If we assume an exchange rate of 1AUD = 0.75USD, Cu price of US$12,000t (= A$16,000t). If we use this & lift C2 costs to say $8,500, the C2 margin would be $7,500 x 25kt/pa = $187,500,000. This would be more than enough to cover an increased debt burden from a higher interest rate. You’ve basically pointed this out in conclusion point 2. Just making the point that while I am assuming a higher debt burden, I am also assuming a higher Cu price from 2024 onwards than today.
In the current market, what percentage of the published after tax NPV of $277M would the market give to CYM shares? 50%? That would be about 19c a share.
I think that is reasonable, but it really depends on the Cu price in 2023. If the Cu price stays relatively subdued - then perhaps 50% of the NPV would be fair. But - if it starts moving north & soonish - we could expect more froth. And critically, it will depend on the terms of the debt funding. The market needs to see that there will be some cream left on the equity side for investors.
Anyway, a great post to ponder. Thanks for taking the time to put that together.
HNY to everyone.
Expand
