The only way for an interested part to gain entry to Pensador is...

The only way for an interested part to gain entry to Pensador is via CVI...

Interestingly, the more CVI they buy, the cheaper Pensador actually becomes...in a round about way of course.

Equally, say an asset were to be backed into CVI...and by that I mean a serious one...it in effect becomes a value adding trade-off for gaining more of Pensador for less.

I suggest we keep this idea in the memory banks...to be explored at another time perhaps?

Anyway, with the Claw back clause, CVI is more or less protected from any hostile take-over activity aimed at Pensador...we will always have last dibs via a share exchange, at our dclaration!

There is an interesting aspect in all of this...and that is one of immediate value measure...

1. Pensador:

CVI will effectively end up with 4.2m shares valued at $20 each...or some US$84m worth of Pensador stock (US$66m of which will be backed by cash)...this equates to some US$0.16 per CVI share fully diluted.

Interestingly, we keep our interests in Fortitude (39.5%?), which is now to be fully funded by Pensador...so whilst the value of Fortitude shares we hold equates to some US$31.6m (22,717,562 x $1.39)...one might argue this is now worth considerably more given its projects are more or less fully funded to production.

If this costs say $200m, this needs to be added to the current value?

Interestingly, the real “bang for your buck” return for Pensador comes from the oil and gas, but not for some 4-5 years at best...one might argue US$500m spent here over the next 2 years might initially only add a few hundred million in value to this asset, which really only pays serious dividends at the end of the development stage.

Of course, discoveries here will add significantly to the asset value...but at say $100m per well, it is a high risk, long term return game, with something of an exponential “happy ending” once production commences.

The point being, I expect value to be added more quickly via the minerals than the energy...and it is the minerals that CVI have retained the greatest interest, both direct and indirect.

This is a significant short-term impact arrangement for CVI...we could be looking at multiple millions of tonnes of copper resources in their Angolan "copper province", not to mention the gold, rare earths, uranium, pegmatite’s...and all manner of other mineral assets.

I read this as the real pay-off to CVI for all it has done...and no doubt will do...for this deal!

So…for the sake of our 12 month value projections, I will assume Pensador increases in value by some 30% via a combination of net value adding via minerals expenditure, less cash decline due to significant oil/gas expenditure, plus asset gain in this same area...making their shares worth some $26. At this price, CVI’s 4.2m Pensador shares are now worth some US$0.20 per CVI share.

So what price for CVI's fortitude exposure?

2. Fortitude:

Well...as I see it, 39.5% of a free-carried exposure to what may well equate to 2m tonnes of Cu (or more) over several projects, potentially 2m ounces or more of gold resources (and all sorts of arbitrary numbers for the rest of their minerals), I am inclined to put a conservative price (in say 12 months), on CVI's Fortitude holding in the range of US$600m dollars...ie 39.5% of US$1.5b of JORC compliant in-ground Cu/Au assets...which will continue to grow in value with continuing development/exploration programmes.

Based on CVI's fully diluted position of 530m shares on issue (we have no need for dilution beyond this for these projects) then we can find as much as another US$1.13 per CVI share here.

3. Cash:

Fully diluted, we end up with about US$13m in cash, in say 12-18 months...or another US$0.025cps

We also have cash at hand, but I will assume it is all gone in 12 months time.


4. Petro Energy Africa:

An arbitrary value equation here…but assuming all goes well and they get the long awaited Bakassi Peninsular exposure, it may be fair to assume a net value add of some US$50m at flag-fall…mostly based on JV capacity to ultimately fund the project via Pensador, if not internally?

Anyway, as an arbitrary “guesstimation” , I thin it is safe to assume another US$0.15cps of value here…at some point down the track.

5. Canzar diamond rights:

Whilst this asset has been backed into Pensador, we do retain a separate, 10% net profit benefit of Canzar’s receipts. So, assuming about US$30m net profits per year ($250m net over 8 years) per project, on the alluvial projects, Canzar’s share of this will result in some $1.2m net to CVI per project (ie 10% of Canzar’s 40% of US$30m)…per year.

Kimberlites are a while off, so ignoring them, we get a recurring income to CVI of some US$2.4m per annum, potentially before the 12 months are up, which using a PE of 8 gives us a value here of some US$0.036 per CVi share.

6. Entity value:

With first mover status, and current connections at the highest levels, I think it is fair to say we are looking at a minimum of US$0.05 cps based on a listing value based purely on the thin air intangibles of existing contacts and good will!

7. Quest value:

Difficult to value…but an arbitrary US$0.01 per CVI share might cover this “asset in waiting”…one might argue the value of facilitating the eventual Dubai listing to be much higher?

Anyway, it appears we have the following measurable value (to varying degrees) for CVI shares…

1. Pensador = US$0.20
2. Fortitude = US$1.13
3. Cash = US$0.025
4. Petro Energy Africa = US$0.15
5. Canzar Diamond rights = US$0.036
6. Entity value = US$0.05
7. Quest = US$0.01

Total value = US$1.60 (AUD$1.69)

This is not far off the $2 arbitrary number I was discussing earlier…just needs a little luck, hard work…and of course 12 months or so.

At this point, the claw-back ratio is just over 16:1…it is currently 91:1.

Now, these are just round numbers, it is impossible to project forward what the end result will be. The purpose of my study however it to explore the possible incentive here…and likely value model…and ultimately to determine a back of envelope valuation model that allows me to make various value assumptions given certain outcomes.

After all, this is all we can realistically do at this stage of the process.

For me, the fact we are dealing with numbers in the $1.60 range, even if projects some 12 months into the future, is more than enough for me to feel comfortable with a long term hold at current levels.

If she hit $1.50 next week, I might suggest she was running a little ahead of herself…and take profits!

Lol

Cheers!