Hello everyone.
White Rock Minerals farm in deal is stunning. Yet the market does not care!?
When I first saw the deal. I thought "wow." Ok it is just a great great deal for White Rocks. And will bring much attention to the company.
However, I wanted a way to put this deal in terms of a rank order with other farm in deals. Not much data exists around this.
So after much thought and teeth grinding, I decided to do the research myself. I chouse a RANDOM 24 month period (July 2016 to July 2018). And looked at every farm in deal done on the ASX, 95 total.
The point of this data was to rank order the deals. While every deal is different I kept coming back to one single data point. How much was the acquiring company (in our case Sandfire) willing to put into the project (in this case WRM Red Mountain) on exploration spend? You know actually drilling holes, and hopefully making the whole project more valuable.
In our case, Sandfire is putting in $30 million (potentially) for 70%. Hence our data point would be $428,571 per percent given to Sandfire.
To give you a another example from a different farm in, the acquiring company was willing to put up to $6 million for 80% of the project. Hence, in this case, the final figure would be only $75,000 exploration spend for one percent.
White Rock Minerals, in this case, would outrank the second example, $428,571 vs $75,000.
I also eliminated from the data set any equity purchase. For example, while Sandfire has also purchased some shares in WRM, this additional money is not in my final figure of $428,571. While this helps White Rocks, this does not move forward Red Mountain on an exploration front. I did this with the other 94 companies/deals as well.
I have put all deals in a powerpoint presentation for my personal use (I am trying to find some additional bargains.) However I wanted to share the top 24 in order of dollar spend on exploration vs one percent of the project lost.
Forgive me for not attaching the other company names. But I put 4 hours a day into this thing for over 4 weeks. So it's not in my best interest to give it away on hot copper.
I would be happy to answer any questions. (I almost forgot, I only did mining companies, no oil or gas farm in).
The bottom line is that Sandfire would not invest $30 million for 70% unless they thought they would get far more out of this than the upfront $30 million. With them taking all the risk and Sandfires expertise. We could have a tier one project on our hands, and we will still own 30%. Management should be congratulated with a market cap of well over $30 million but instead, they are penalised? Very cheap.
