Another Positive, page-8

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01/07/14

19:31

Post #: 13596858
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Originally posted by pokemon ↑

With people trying to predict a price for the sell off of the B4M leases and resources I believe you need to consider the following.

RCR have valued AGS interest in B4M at $207million. That is the value of the project assigned to AGS. Based on a long term U price in excess of the current price, and at a exchange rate lower than the current rate. So you could say this may be wishful thinking.

Now if any of you were to buy an asset, you are not going to want to pay the full price, or pay an amount equivalent to how much profit you are going to make. Why would you buy something for $207million just to make $207million, and at the same time take on all the risk of long term U price and exchange rate.

My prediction is that the B4M will be sold for a sum of money less than the $207million value placed on the project by RCR, but in return AGS will have a royalty agreement over the leases. This way it is attractive to any buyer in that there is a share of the risk (U$ and Au$ rate) and also attractive to the seller (AGS) in that should the U$ and Au$ be in their favour and should there be more Uranium than initially identified then AGS will benefit over the long term.

Hence I suggest it will be sold at a low cash price up front, but there will be a significant royalty attached to the sale. This way it will ensure that AGS has a constant income over the next however many years to sustain future projects and or to pay out dividends at a semi regular basis to share holders.

The other concern I would have is the ITOCHU agreement. Now that legal are finalised. ITOCHU can acquire up to 40% in Alliance or Alliance Craton at a discount. This was agreed in 2012, and I dare say that at the time the people who prepared the deal were anticipating a significantly higher share price than what has been evident over the last 2 months? Is it possible that the ITOCHU deal could come to bite AGS on the rear end?

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The royalty route was something I hadn't considered before pokemon, and it's an interesting concept, but - royalties or not - I will lose my last shreds of respect for our gallant leaders (not to mention a big wad of my hard-earned) if 4M is sold for less than $100m (which equates to 30c/share).

AGS Price at posting: 17.0¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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Another Positive, page-8

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