It is all about the flow of money and time. And the control of both. Vale has enough supply now. They do not have enough supply in the future especially if demand ramps up. Vale has control of the asset for now at the cost of $US18M. Both CLE and Vale know to a dollar what the asset is worth. Vale do not have to put their hand into their pocket again until the next stage, then they have to put in some serious money (chump change for them but still!!). At that stage they get some ownership. But the timing of the payment of the asset has been kicked down the road.
It is only at a time when it can be seen that the value of the asset is going to greatly exceed the value that has already been established, will there be a need to control paying more than originally estimated, and there will be a need for Vale to escalate a takeover. That may be at the end of this first stage, it may be during stage 2 or at DTM.
CLE Price at posting:
5.4¢ Sentiment: Buy Disclosure: Held
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