SFX - Just a matter of time....!

Doesn't matter which way I look at Sheffield Resources now, I can only see it getting a significant re-rating in the next 4 months. One of the best asymmetric risk/reward investments I can find.

Here's my expected series of events and basic 'back of envelope' based on my expectations for the BFS and project finance:

1. DFS released mid-late November - Post Tax NPV(8) ~ $1.1Bn, Upfront Capex ~$440m (down from $478m)
2. Project Finance completed mid-late December with NAIF (increased to circa $160m) and third party (most likely Taurus if they sharpen their pencil with Cutfield Freeman & Co. - reduced to circa $160m) - Total Project Finance $320m
3. $10m Rights issue to existing shareholders (no institutional placement) early February for SFX working capital
4. Financial Investment Decision (FID) late February/early March
5. Construction commences in earnest in April with start of dry season


At this point, SFX shareholders will own 50% of a tier-one project, in a tier-one jurisdiction, in a commodity heading into a supply deficit.

The value to each shareholder = $550m (50% of $1.1Bn)/ 370m shares (post rights issue and director performance shares) ~ $1.50 per share

Even if you apply a conservative 50% discount during construction it still provides more than 100% return from current prices in the very short term.


Article of interest: https://stoc*he*d.com.au/resources/is-there-unrealised-value-in-the-majors-this-bridge-street-guru-suspects-so/

Relevant extract below.