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21/10/14
10:48
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Originally posted by nihilism
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Ropoh,
how on earth is that attractive? you want a giant to pay 1.5billion dollars (50c/share) to takeover a company with very little cash, has debt and no operations and a project with an initial capex of 3.5billion dollars?
Economics make no sense, $18/t margin x 35mt/year = $630mil profit, IF their costs hold (which forecast is never reliable, especially in a non-mining experienced company with geo-political risk) but assuming they hold.
You pay upfront 3.5billion (i.e. 3.5 bil debt) with 630mil profit gives a payback of ~6 years and makes the NPV8 and NPV10 negative at project year 10. Thats not attractive, especially if you then add the 1.5billion you're asking for the company, makes it a 9 year backpack (approx) and a net negative NPV10 at year 20.
I don't think you should take up economics. As for where the $62/t comes from, thats the AISC quoted by the company in their recent presentation.
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It's not the problem with the amount of payout. The issue is the payment over the period of time.
If taking into account the discount rate, the project is still profitable from an econimic point of view for SDL. Not the best but an average one imo.