@badatoc641A zero dilution, DFS based valuation (i.e. using long...

@badatoc641

A zero dilution, DFS based valuation (i.e. using long term pricing) would look like this:

The numbers highlighted in yellow are what I had in the previous post. I have now added a "100% debt" line which is highlighted in green - here the share price at the point of raising finance is irrelevant which is why I removed the value.

It basically adds $1 to the valuation at the point of finance from $4.73 to $5.70 and a little over a dollar at the point of construction ($6.12 to $7.37). At the point of production it will add over $2 to the valuation (based on a PE of 10) from $10.65 to $12.83 - here the additional value is more than the current share price! Obviously if we compare it to raising finance at lower levels (e.g. $2.50) the additional value it creates for shareholders improves considerably.

The "in production" valuation based on the current situation (i.e. the current spot pricing) would look like this:

Again the numbers highlighted yellow are what I previously posted and I have added a "100% debt" line which is highlighted green.

The result is that a zero dilution option would add over $7 to the "in production" valuation based on the current spot price, moving it from ~$36 to ~$43.

A zero (or low) dilution option would be an absolutely amazing outcome for shareholders and while it certainly sounds too good to be true (to me at least), the fact that an offtake prepayment of 4 months of production would more than pay off the entire capex of the project, as I mentioned in the previous post, makes me think that something close to zero dilution is certainly within the realm of possibility. The longer that spot prices stay at these levels the more possible the impossible becomes. This is why I believe that spot pricing is relevant to developers - it represents the current situation which helps to provide a window into the future. It's all a very complex dynamic (valuations, perceptions, expectations and forecasts) and it's all related and connected (i.e. nothing is dismissed or ignored).

Just to be clear I'm not normally one for doing spot price based valuations as I feel they significantly overstate what is likely to be situation by the time we get into production. However, equally the long term pricing represented in feasibility studies is significantly understating what is likely to be the situation when we get into production given that: 1) the long term pricing is a forecast average over one or two decades and 2) the long term forecasts are very slow to respond to the transformation we have seen across the industry over the last 2 years and the new long term direction that has been set. What this means is that the reality over the short to medium term (i.e. the next 2 to 5 years), which is the timeframe that is most important for us as a developer moving towards producer, should be somewhere in between the two valuations.

ALL IMO DYOR