A few thoughts about the partnership deal being negotiated.
1/ it should be a simpler deal than the demerger, taking less time. Lithium du Mali S.A. is already a separate entity so they are just selling a share in this entity.
2/ last month they talked of Macquarie negotiating a possible partnership, offtakes & finance. More recently, specifically the webinar, Doc Mike talked of “a binding transaction”. This is singular - sounds like the offtakes/finance are no longer needed, though Doc Al, did stick to the original mandate given to Macquarie including the offtakes/finance at the AGM.
3/ Mike spoke of FFX taking a “meaningful percentage” in “spinCo” as he called it. This is the first we’ve heard of this, and it tells me they are fairly advanced in their negotiations.
4/ the new partner could enter ownership in 2 ways, either owning a share in spinCo, or just holding a share in Lithium du Mali S.A. & SpincCo owning the remainder with a JV between the 2 entities. I think the former is more likely.
5/ In yesterday’s Proactive Interview with Doc Mike, he said:
“....we said all along that we hoped to advise shareholders of an outcome this Quarter and I stand by that.”
so expect it within 3 weeks, probably preceded by a trading halt.
6/ In the AGM presentation, Doc Mike said - hopefully it’ll be another transformational transaction.
Goulamina really has 2 valuations:
1/ The present unfunded valuation - projects with no finance or offtakes are valued at a much lower % of NPV, especially in Africa where finance is more difficult.
2/ The fully funded valuation - such projects will go ahead, so demand a much higher valuation
In our case we are looking at using the partner’s (I’ll call XYZ) cash injection, hopefully to fully fund the project, so the project becomes even more valuable.
To be clear, the signing of a partnership deal, thus financing it, totally changes the valuation of Goulamina.
Euroz used a “Base case” sale price of US$200m for 50% (close enough to A$260m), this covers the capex with US$4m spare on top of the already built in contingency.
Whether XYZ deposit the money into a Goulamina bank trust acc or commit to spend the A$260m on the project is basically the same thing, I’ll assume the former.
Using Euroz’s base case, when the deal is signed, it will put a valuation on a fully funded Goulamina project.
100% will equal A$520m with FFX & XYZ both owning 50% or $260m worth each. (until we demerge)
Now this is a very good deal for XYZ, although they’ve outlaid $260m, it’s really only cost them $130m because they own half of Goulamina which has $260m in the bank.
I think there would be many strong arguments here to say that is too cheap. (it’s just Euroz’s base case)
I won’t go into what it’s worth, however Euroz’s base case would have to be the 2nd best deal of the century - for them.
Refer to point 6 above - based on that you wouldn’t expect anything less than the Euroz base case.
Based on the above, I can’t see any deal being done for less than Euroz’s base case US$200m for 50%. Importantly the project will be fully funded.
Higher sale prices would mean more money in the bank, beyond say $20m extra cash, I think they’d just sell a lower percentage. XYZ will eventually be the major shareholder anyway.
In any case, even on the base case, we will have a market proven defendable $260m valuation on our 50% of Goulamina
Given our present market cap is $302m, what does that value the gold at?
