There is significant upside with funding. I expect Ryder to place a NPV10 on Grieve of around $370-$400mil based on their previous figures. Elk have stated they are looking to either JV or debt fund.
My thoughts, ballpark figures,
Low end scenario would see Elk pass 65% of grieve to a JV for free carry ($35mil) to first production. This scenario would see Elk maintain $1.60 NPV10 PS (per share) following which ELK would average approx 50cNPAT PS per annum over the first 6* years of production= $3PS. The JV partner would receive approx $210milNPV upfront for $35mil a significant portion of which would only need to be paid shortly before production commences. A very good scenario for the jv partner.
If a funder were willing to come onboard, Elk previously stated we may need to give them equity. Assuming we gave them 15mil shares in exchange for funding. They would instantly acquire $45mil NPV in Grieve + exposure to all other projects going forward inc Ash Creek. In return for lending Approx $100mil, only a small amount would be required initially with the rest being gradually drawn through to first production. Reflects $3NPV10 PS Average approx 85c NPAT per annum for the first 6 years of production =$5PS.
Of course there are a million different scenarios these are just two I put figures to. The outcome may of course be more or less favourable, but Elk certainly look to be in a great position. Matt could prove to be a very good asset during these negotiations. Plenty of upside to the shareprice
Cheers
*"about 80% of the recoverable oil would be produced within the first 5 to 6 years of production" Uniiversity of Wyoming report
ELK Price at posting:
25.5¢ Sentiment: Buy Disclosure: Held
