@1OldGreyFart@glemonTo answer your direct question GreyFart regarding takeover bid I suspect Glencore will eventually build a 19.99% stake in Hot Chili and become a more activist style investor whereby they gain control of the board and any future capital allocation decisions regarding the company. As it is under 20%, they aren’t obligated to make an on market takeover bid. I believe there are also creeping provisions whereby they can slowly build a further stake (over the 20%) without triggering a takeover offer on market. Most times these large capital based decisions need 75% of voting rights to approve, Glencore can essentially be a pain in the arse as they only need another 5% to essentially block any future strategic capital raising decisions. Glencore are ruthless and will halt progress on the project in order to pay what they want for it (sometimes the others can’t do anything about it). They will just leave the project sit idle until the others are ready to talk at the negotiating table. I am definitely weary of who we are dealing with and hence the conservatism with this investment.
I actually think we should have waited until after the pfs to extract true value for the 10% stake essentially given/gifted to Glencore in my opinion. It was definitely very concessional as it valued the company at the time at 144 million (14.4 million raised x 10% for their stake). I think Hot chili were desperate for capital and said if we have Glencore on board then we are a lot more formidable in the markets eyes and hence why they raised capital on the back of it (TSXV listing). The only problem is that the share price has gone backwards from that point onwards. Not insinuating this is a direct reflection of the above transaction with Glencore but it hasn’t worked out the way it intended to.
I also am looking forward to seeing the pfs as it will finally shed the light on the numbers of the project. I have come up with my own back of the napkin calculations in order to gauge how much I should be paying for Hot chili.
The rounded conservative numbers in US dollars are as follows for Costa Fuego:
25 mine life with annual output of circa 100,000 of copper and 100 000 ounces of gold.
Total estimated US gross revenue over the entire project is 26 billion. (21.6 for copper and 4.4 for gold)
The net profit margin average over the course of the last 10 years for the top 40 mining companies has been around 10%
As a result we have 2.6 billion in net profit for the entire project.
I have an expectation that capex will come in between 700 and 900 million. 700 being the low point and 900 being high point.
As a result that leaves us with 1.7 to 1.9b worth of future profit after deducting for capex.
At PFS level, I would suspect us to have a market cap of approximately 30% of the above which is close to a 500 million market cap but if the numbers aren’t as good then that figure will evidently be lower.
All my opinion only so please DYOR, cheers CP.
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