NCZ (ASX) Food for thought...

Originally posted by BayesSigma ↑

Congrats to the NCZ team for developing what will hopefully be a fruitful operation. As a recent and small shareholder there are some very misinforming metrics being thrown around, mostly innocent nevertheless. Hopefully thIs saves the silly few who have no dIversIfIed portfolIo or fancy themselves as buddIng Value Investor prophets...

- A suggestion of '50% dividend'? That's obsure - the company needs to retain earnings for future growth and working capital management. I would hate to thInk of the gastly dilution effects thIs would have on prIce.
- TossIng around market cap ratIos. Stop wIth this nonsense of usIng market cap as it is meanIngless one should use EV for comps.
- Earnings and net profit is another thrown around term which is ambiguous- EBIT, EBITDA, NPAT for clarIty
- Positve 'earnings' does not seamlessly flow into market cap!
- Pre-production and non-audIted management presentations need to be as optimistic as possible; quoting verbatim management slide packs is not a truth!
- A pre-production DFS is a desktop study usIng thumbsIck dIscount rates, not a tool to accurately forest a share prIce at some poInt In tIme

As this is a single operation, with a single commodity within a single industry (resources) let's hope folks are investing long term not looking for a get rich quick gamble. There's far better ways than rolling dice, even if the strategy involves seven years >gasp
All that aside the fundamentals look reasonable as a small holding in a balanced investment portfolio.

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The big money is to be made in exploration. The tailings operation can cover the following

- remediation of the old mine site
- reactivation and maintenance of the sunk cost plant and equipment
- a strong exploration program
- a steady dividend. Maybe not big, but enough to keep shareholders happy

IF shareholders get over the next 6 years, $1 worth of dividends and tax credits, then effectively you get a free ride on an exploration program near one of the great mines of Australia. Where do you find new deposits? Near other mines

So if they explore and find a good deposit that has a mine life of 7 years?, then in 6 years time you have a mine of 9-11% Zn x 7 years, rather than just a tailings mine of 3% Zn x 0 years

If the company had only bought the tailings, this company would be so-so, but the plant and equipment means they could one day, use 1 processing facility for a new mine and the second to process other companies ore on a toll basis (can they use these facilities for copper? Or only lead, zinc and silver?)

Either way, the leverage to monetise new deposits means they have bought a seat at the table of opportunity. Probably the best comparison is Kambalda, re: nickel processing