The big argument against investing in CHM is risk-reward.They...

The big argument against investing in CHM is risk-reward.

They have nothing but this claim to sustain the SP.

Just to support the current SP they need $100m out of this after meeting all costs. That is about 25% of the value of Jack hills plus all the development that MMX have put on it.

Assuming a 25% chance of any significant victory the average value of the award needs to be about $400m just to justify the current SP.

These are the assumptions I used when deciding not to buy CHM as a hedge.

Probabilities in my mind from info available:

No payout - 50%
small payout - 25% - up to $2m
mid-size payout - 15% - up to $20m
big payout - 10% - maybe a 25% stake in Jack hills or $50m.

The risk weighted value based on my assumptions (which may be wildly wrong) is only about 8-10 million, or about 1c per CHM share.

I think anyone thinking of holding onto or buying CHM shares should work out their own numbers - but you have to assume numbers 10 times more favourable than mine to even justify the current SP - and for something with such high risk you would a return averaging 100% profit - so you have to have an outcome 20 times as favourable as my predictions to justify a new investment - given you money will be tied up for about a year or more of legal wrangling. Do it both for the fully diluted case (1.6 billion shares) and undiluted case (about a billion shares) - bearing in mind that if the value of winnings is more than about $200m full dilution is likely to occur - limiting the upside case.

Those willing to trade this good luck to you - just be prepared to lose all if they go into a TH before announcing dropping the case.

IMO it is very hard to justify the current CHM SP given the very high risk of a 100% loss of capital (insolvency if the lose and have costs awarded against them), and the limited upside multiplier due to the massive number of shares this is shared between.