ARL’s situation is very different to those of junior mining companies’ farm-in deals with the big boys, where the big boys take a big chunk of the tenement stake in return for drilling work done.
In farm-ins, there is high risk of the drilling coming up zilch worthwhile grades.
ARL already has de-risked and massive JORC-compliant resource and reserves.
The JC has proven, therefore also de-risked, superior tech and expertise to develop laterite Ni mines.
Given that both sides have their strengths and advantages that complement each other, as well as with minimised risks, I have difficulty factoring in a deal wherein ARL trades a significant (meaning >5%) share of its resources for a measly $50M. The PFS indicates that even at 5%, the NPV is worth $250M, which is 5x.
But ARL’s last cr was post-PFS, and the company accepted only 70c per share instead of > $1.00. That cr really threw a spanner in the calculations and optimistic assumptions made in our guesstimates.
My bid for the free beers:
1. Ring fence Goongarie Hub’s resources into a separate company. Let’s call it GHR.
2. GHR to issue 200M shares. No need for high SOI liquidity like in the billions of shares.
Keep it simple and sweet because IB seems to think the same way as Warren Buffett, who was totally against doing any share split to increase the SOI liquidity of his prized company Berkshire Hathaway. Each of those Class A shares are worth more than USD600,000. Yep.
Tesla shares peaked at only USD250. Bitcoin is peaking at USD70,000+. Just saying…
3. ARL keeps 80% GHR.
4. The JC share the 20%, but must pay big money for it. Maybe $1B. The money is fully invested into mine development.
5. To pacify MC, it gets its lion’s share of longterm offtakes.
6. To pacify SMM, there’s ARL’s separate shares. ARL issues 10% to SMM, and SMM gets to farm into Kalpini and Yerilla.
7. The JC funds the DFS, which cost becomes part of the 3.1 years payback period. It’s likely gonna get worked into the DFS budget.
8. The JC assists to secure Japanese loan, which also becomes part of the 3.1 years payback period.
Why would the JC want only 10%? It’s not the profits they are after, but the blocking stakes.
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