Damn, but this thread almost seems like a mature debate (check I'm actually on HC). I hope the main point I got across is that valuations are subjective, depending on your perspective and parameters. BHP and RIO have been mentioned a lot as TO suitors, what do their corporate guys think of the strategic vs NPV valuations i wonder, because that's the opinion that counts if a TO is your exit strategy...
@ozblue I'm not sure where you get the "WA1 is basically only 20% of the MC of SFR" from, but if you mean todays relative MC, perhaps you need to consider the very large infrastructure and plant sunk investment? Right now WA1 is a deposit in the middle of nowhere (not being inflammatory, just how it is) with no infra of plant, which is a material investment required.
I agree that NPV unfairly cruels LT deposits with the compound interest reversed. LT deposits have a value which I'll add into the 'strategic' value pot. That said, NPV or ROI certainly has a large impact on the value of a resource, because finance is finance, and investment returns are agnostic on how you generate them. Roll it over in HY bonds is just as real a return as wating for the second coming on a generational mine life project. That said, in these days of heightened inflation expectations, the inflation hedge of real assets in-ground is definitely a non-financial security worth paying up for.
"WA1 has a long term very high grade ore body, better than Araxa because of relatively low thorium"... who gives a shit if it can be stored in waste tailings facilities?
"will have the by product of phosphate, with the phosphate taking care of all processing costs, from my calculations"... well, maybe the phos is recoverable in quality as a bi-product from the run-of-mine (not just the high phos met sample they released), maybe not. One reality WA1 can't hide form is the tyranny of distance, it costs a lot to transport 1500km and it costs a lot to process on site 1500km from the coats middle of nowhere. I wouldn't hang my hat on biproduct credits...
"The big money is not blind to this and the ~$1.1B Mcap will not last long"... well, we can all smack talk, maybe the big money are already taking profits?
"CBMM are not blind either, so I'm very confident they will want to work with whoever starts this mine, and probably take a cut in production to allow for the new player, like they have done before"... I'm not sure what you just said, and I;m not sure you did either (hat tip Donald), but no way will CBMM be allowed to take any control of Luni or the whole idea of supply chain security/competition is out the window... " think is likely a supply-constrained market."... hmmm, looks like a 65ktpa market lifted to 85ktpa market with China's foot on the accelerator, meanwhile CBMM is sitting with 150ktpa production potential waiting for a buyer...
Top critical mineral miner CBMM sees opportunity in EV batteries - MINING.COM
"On the other hand your argument re acquisition costs have me a bit confused. I do this stuff for a living"... you're not the CFO fo CAI are you? Just joking, only people that do stuff for a living aren't always good at it.
"any NPV (or EV while on market) in theory has all future costs (as part of all cashflows) factored into the final discounted value. From a (pure) mechanical calculation standpoint BHP et al don't need to look at it any differently to the average retail punter who currently has a share of the 1.5B EV."... that's true, which brings us all the way back to ROI, NPV etc. At $22/share and $1.5B MC, BHP needs to see an acceptable return on investment, yet shareholders are looking at the DFS which carries no intrinsic MC and say "if our DFS has an NPV od X$B then we want to get paid that for a TO". So what is the profit potential for Luni, and what discount rate do you apply to that risk, because BHP doesn't want to pay overs to WA1 shareholders then whatever for capex likes it's some magic pudding of endless free cashflow... Bottom line, the acquire is on the hook for a TO cost then capex, where shareholders have already accrued the discovery value and are only looking at DFS capex vs return metrics.
"I think given the current quality of the in-ground resource, early metallurgy, intrinsic value of the primary commodity, scarcity of supply, potential for cheap (Govt) debt and a solid mgmt team I think the balance is tilted firmly in favour of a (fair / efficient) MC well north of $22."... I can't argue with rent seeking grifters that follow critical minerals and climate change like birds of carrion, it's a fat beast to feed on. Cheap guvvie debt only, shouldn't you be aiming for huge grants? I'll admit that guvvie handouts are a wild card that could tilt the valuation in WA1's favour. It's a different world to when I was young, but beware the hand that feeds... it might bite you. Can;t think of a commodity governments subsidised beyond economic rationalism that didn't become over-supplied, the price crushed, which is good for the people and governments but not investors (there is a conversation worth having...).
Yes, Lassonde curve treats poor projects a lot worse than good ones, largely because the MC and thus dilution becomes self-fulfilling in either direction. WA has the luxury of a >$1B MC and can thus raise capex without the sever dilution that kills most juniors. Yes, Luni is a slam dunk, which is why the MC is >$1B. The quality of the resource isn't in debate, just the valuation... and just because the project is great doesn't mean any and every high valuation is justified. It all comes back to ROI in the end, so maybe we need to better consider waht those numbers might look like to gauge thatg value?
GLTAH
(20min delay)