Very interesting read those 2 different valuations methodologies from Argo and Bells. DCF versus IGV arriving at the same value.
I wrote some time ago about valueing the IGV of the resource, much to the disgust of a few posters here, in exactly the same manner as they way Bells has quoted today. I hope those posters now take heed that it indeed is a very NORMAL way of valueing a company at this early stage of its development.
I still think its too early to apply DCF valuation methodology to AVB. Give me some JORC Reserves, BFS and financing and I will consider it. Other than that its just plain speculation that it indeed will get to production. If the resource is ultimately big enough AVB will get gobbled up by someone (Xstrata most likely). Finance is not guaranteed right now, and there is very wide expectation on the capex. Argo suggest $250m, but some posters here are thinking that Vale payment will cover it. At this stage, I doubt Vales payment will cover the full capex requirement.
I dont know where the capex will ultimately come in at, but I feel that it will be closer to the $200m mark to produce 50Ktpa of concentrate than the $40k mark.
Bring on the strike extension drilling to produce a bigger inferred JORC, I say. That will be the tonic to move the SP at this stage over the next 6 months.
Just trying to be a realist and will look for SP to grow when things de-risk.
Just my observations.
HB
AVB Price at posting:
9.3¢ Sentiment: None Disclosure: Held
