Hi Don,Always good to see someone put in the effort to try a DCF...

Hi Don,
Always good to see someone put in the effort to try a DCF analysis. Many ways to slice and dice this type of analysis so I also just did a quick check on your numbers.

Just a queston first ... assumption is a US$200M loan is taken at 10% interest rate - so $20M/y interest bill - and that is deducted from the annual cash flow of ~$80M (10K x ($13,739 - $5,647)). But that $200M principal isn't repaid anywhere is it? Also no inclusion of corporate overhead costs (I note you have the Opex), tax (maybe assume tax break from Thai Govt) or sustaining capital costs.

So I ran a quick DCF as well with debt repayment (at the end) in PV terms.Bumped up the discount rate to 14% (more fo the higher risk aspect but also to allow for some tax). The big issue I have with this is off course borrowing US$250M for the project --- NEVER going to happen (IMO). Even with $2 of Debt for every dollar of Project equity means we'd need a partner to inject ~$80M ... as we aint got it. There are creative ways for this to happen with minimal Topco level dilution and/or asset level sale of equity that I've modelled before ... but it requires a "leap of faith" by the prospective partner (something we are yet to see and with current market may well be a big ask). Still this is a "future" play.

The DCF model I ran (using your prices/production/FX rates) suggests we are paying AUD$0.15 to buy a stock where the present value of the future cash flows (from just RKLP) is about $0.50 ... a far cry from your model Don but I think with discounted cash flows you have to be more conservsative. But again, being practical this model would be a "failure to launch" as 100% debt finance will never happen.

If I dropped the debt to $150M and put equity to US$100M then the problem is (today) I have to issue about 1B new shares at AUD$0.15 to raise that .... that's also a failure to launch.

So IMO it comes down to a partner taking a part of the asset and funding ALL the equity required by the project. I'd be happy if we kept 50% of the project. Now believe it or not, with lower debt in the project and the partner contributing 100% of the Equity capital needed and PAM keeping a 50% project interest .... the value of that interest is AUD$0.69

Anyway just playing with various inputs