With $19bn of metal in the ground at Mehdiabad, and with the possibility of a staged development (i.e. not requiring the full $1.6bn to $2bn all at once), it takes monstrous incompetence to reach an agreement with the Iranians and come away with no share price rise at all. Only a brain dead idiot could do that. With such a massive economic rent at stake why else would the Iranians take so long to reach an agreement (6 years?)? We are dealing with people who do not want to give away one cent of the economic rent (why else did they cancel the agreements?). Why else are they so keen on buy- back agreements? The economic rent on Mehdiabad is enormous. The BFS (admittedly not with a staged development) put Mehdiabad in the bottom quartile by cost of production, IIRC. I'd be happy with a sale too, but not for less than $36m ($18m for expenditure recovery and $18m for a discovery fee), and it would have to be paid in $ so we don't have any nonsense with the rial and any tiered exchange rate scams, and it would have to be paid in time before any capital raisings on Sandpiper. The Iranians must be laughing all the way to the bank thinking how stupid some Westerners are at bargaining. The Iranians have got Jordinson to agree to rewarding them for their bad behaviour (the longer the regime stays in power, the longer the forex shortage will last and thus the less time there will be on the 25 year profit sharing arrangement: without forex there is no mine?
P.S. The latest scam in Iran has been people obtaining forex at 12,260 rials to the dollar to import goods that qualify for that exchange rate and then re-exporting the goods and then converting forex received on resale at around 33,000 rials to the dollar. One article I read calls this "rent seeking behaviour" (using up scarce resources to compete in effect for transfer payments i.e. subsidised forex rates).
UCL Price at posting:
13.5¢ Sentiment: None Disclosure: Held
