lorry gone, page-50

Bill, here's a recent article on potash, Eritrea, and mining companies:

http://www.proedgewire.com/emerging-markets-intel/mining-companies-operating-in-eritrea-face-greater-odds/

It really is a worthwhile read. As STB is not yet building its mine, it is not using army conscripts (unpaid labour ie slaves). This is a real issue for Nevsun. As to the threat between Eritrea and Ethiopia, well, it will remain whilst Afwerki is in office.

Bill, capex required for development of STB is $750m. But here is why it is unlikely- but not impossible- that STB would have a market cap of $25m - $30m: the Duketon assets. There is a valuation report on these (they are likely to be divested as an in-specie to STB holders). Duketon has a value of about 18c per share. So, STB has a value put by the market on the potash- of about 20c per share. Really, Duketon hasn't been focussed on by the company, because they got stars (potash) in their eyes, and that was going to be the big winner. So, STB has $20m in cash and investments. Minus the cash, and Colluli and Duketon are priced at about $30m together.

In my opinion, but I am not a holder, the best outcome for STB is that ENAMCO/Eritrean government buy out Colluli. This would more easily happen if the demerger took place, because most of the cash would stay with STB. The demerger would likely result in *some* fall in STB share price (unknown, but 7c is spoken of in the valuation report) but the share price would likely rise by that level if the past is anything to go by- the share price rose last time when the possibility of an ex-date arrived- see the chart around mid-December. Then, it would be Colluli only- a sale may be possible. The Colluli project would take with it most of the cash.

The squeeze is on re Colluli. How can a company with a $50m market cap possibly find $750m to sole develop it? Well, the DFS is coming out soon, and apparently, there is scope for less capex. Colluli has been spoken of as a "strategic and significant asset" by the Eritrean government. Those words, when used by a Dictator, could mean nationalisation. However, there is more than one way to nationalise. Say STB does a DFS and raises more cash, but the market cap stays around the same (the pro-rata distribution of Duketon shares might then increase). Enamco then buys Colluli and pays for it with the cash STB has. Eritrea gets back its asset, it costs them pretty much nothing to do so. Eritrea/ENAMCO already own 10% of STB.

Anyway, just some cobbled together ideas- all completely speculative.

PS Bill:

* that article on Tesfa news is about Petro leaving Ethiopia, not Eritrea. Exploitation by the company was the reason. Eritrea has govt exploitation (and Nevsun).
* tesfa news is an Eritrean propaganda site- pro-Eritrean govt, anti everything Ethiopia
* Expect pro-govt trolls to come to HC when anything is questioned about the Eritrean govt.