With this late stage value we now have one of the most asymmetrically risked moonballs we'll ever see. Hinging on finance of a seemingly astronomical US$318 is a billion dollar NPV with leverage to a volatile commodity in structural deficit. Upside years comfortably show $300m EBITDA at $14.50/Lb with a $120m baseline at $8/Lb. V has a sexy mechanism in place to keep prices above $8/Lb, double our marginal cost. VRB is a beautiful technology which will absorb all available cheap Vanadium for the next 30 years. A volatile commodity with limited downside risk is a very rare pepe.
Clearly the market doesn't believe finance is achievable. It won't until it's proven. We'll rally and sell off between now and that key milestone but without funding our DFS and resource are hard to put a value on. I'm guessing you coud fire sale it for $20m of script to one of a dozen players as a second way out... chump change compared with it's measured value. Largo for example are sitting on $190m cash, bankable future cashflow and a dwindling mine life... our downside is limited.
So after getting comfortable with the people involved and understanding the downside... what does the upside look like, where's the moon? There are way too many cheap companies out there to go buying a spec without a decent payout. What does a decent funding deal even look like?
We're swimming with the big fish here and they're going to drive a hard bargain. They also won't much like playing together so I've pencilled in a 50% sale as the most likely outcome. We offer 25% and play a few games but at the end of the day we take it, anything from $10-$100m is realistic. While that's a big range the dollar amount doesn't impact end value as much as you might think.
A 50% sale gets us funded by virtue of the fact that big brother has bottomless pockets. Direct loan or guarantee but at that point funding risk is completely off the table.
250m SOI and forward earnings of $120 - $300m. Our debt level hinges on the sale price or starting cash... $400-$500m. Subtracted from an asset value of $1.2 to $1.5b leaves us equity of $700m to $1.1b. NB I don't assume we'll see a 10x multiple of a $14.50 pricing year but 5 is safe enough.
$2.80 to $4.40 mature price range, of which only 40c is determined by the sale price in this scenario. Stage 2 development, rapid debt paydown and mine life extensions can easily see this make $10 / share in total returns over a lifetime. Who cares about multiples if you don't sell?
