I see the threads are still in chaos. Here is my take on the NPV and EPS and P/E debate etc etc I'll just draw on this post which has more information, and since that post an Offtake has arisen here - Post #:49062547.
""......... some people confuse NPV and nominal capex - capex is a part of NPV itself so it has been accounted for in project feasibility where NPV and IRR is determined. Also NPV is discounted cash flow. In production you move to nominal based metrics is my point. According to the DFS, and the fact I aimed to replicate it , Post #: 44177152, I got essentially very very close to the DFS IRR and NPV values. So, if variables come in as assumednominalcash flow (i.e. profit in nominal terms so don't confuse NPV as teh way you pay of noominal debt) is some US$203 million per year in production - 75% of that is US$152 million to AVZ, making payback period 3 - 5 years depending on how much funds are borrowed by AVZ and the assumption here is AVZ pays for all the capex.Point: Don't confuse NPV with nominal profits. This assumption and therefore modeling also needs to be read in context that the DFS did not have SEZ benefits nor refund of VAT, which would be a quid pro quo for AVZ picking up full capex, if that is what it is meaning a higher free cash flow btw if modeled in the DFS itself. Also note the NPV been quoted by some on here is also in US$.""""""""Now lets get to basics, SP is a function of future earnings. If the market is also pricing you at above NPV, it actually is probably a positive in a way because what is been implied is the market believe you will get to production is my point. As a general rule of thumb, prior to Offtakes/FID SP would theoretically be 30% - 40% of NPV IMO IMO IMO, higher as Offtakes are signed etc etc and funding secured, but yet it can be higher than that if the market either believes i.) the probability of you getting to production is high and/or ii.) they expect you to go into production at a higher configuration.
Now the sharemarket is littered with exploration companies that have SP currently significantly higher than their DFSs or even have a SP very high without a DFS. Lets take a few:
1. ADN - current SP is higher than NPV. I posted about this in ADN as a holder btw - why, the market is probably expecting IMO that ADN to be in production in their stated timeline and maybe at a higher configuration and/or are now moving to nominal values as they move to SP (like EPS and PE ratios)
2. CHN - no DFS but look at the value.
3. PLS - producer whose SP no way reflects current profitability, so its SP must reflect future profitability.
4. Others insert your examples
Woody, I can't believe this has to be explained to you. If the market didn't believe AVZ would get to production its SP will be lower. Now for AVZ to maintain teh momentum it must sign more offtakes, get funding and FID sorted out and start construction no later end Sept quarter 2021 if wants to be in production in 2023. If those timeline are missed then SP will drift down is my point, but if hit SP moves up is my point, an obvious point. As I said the market is forward looking.
All IMO IMO
(20min delay)