Potential Daunia Aquisition

Friday night so wanted to take a look at the impact of a potential acquisition of Daunia as continues to get reported and usually where there is smoke, there is fire.... For what its worth I have been pro an acquisition more due to sentiment to coal and track record of BHP of giving assets away...

Firstly let's take a look at the BHP Daunia reported production numbers [Link Here] and let's assume 4.8mt annual production and total costs of $105/t and factor in the scaling qld royalty payments

Now, the AFR has reported bid range was $3.5 - 5bn USD for both Blackwater and Daunia who knows how true this is but let's run with it. Daunia makes up some 24% of production so let's assume $1.2bn USD or $1.75bn AUD for Daunia

Scenario I - As Is



Currently, I am showing a forward EV multiple of 2.84x end of Q2 after the payment of all of our taxes so use that as the baseline
Now lets let look at some revised numbers to include Daunia

Scenario II - Aquisition of Daunia



Post transaction we would be trading at a EV multiple of only 2.46x so overall an accretive deal for shareholders assuming the coal price remains at these levels. Running a quick sensitivity on coal price and acquisition price to try and find where a deal wouldn't make sense ie. EV multiple is higher than 2.84x


The above illustrates we can clearly afford it out of cash reserves and still consistently pay a ASX top quartile dividend moving forward (assuming 32c for FY23 its 9.0% annualised fully franked or on my numbers with a 45c dividend 11% annualised)

I would love to see some sort of vendor financing or even a potential minority JV as was also reported which would de-risk a deal further

But overall I trust the management here to deliver, the above indicates could be more accretive than the buy-back. I watch and wait to see how this process plays out and hopefully this thread can stay on topic....