I was thinking the same thing. The only way I can explain it is that the market is applying a very steep discount (30-40%) to all the assets, and/or assigning almost no value whatsoever to McPhilly's. I'd be mighty miffed if I was a sh, and deeply concerned if I was RRL management.
If you look at recent transactions across the Goldfields (including RRL's own IGO transaction) for producing assets, the yardstick looks to be valuing the asset at around $1,000 per Reserve oz. There are other more complicated ways, but using a Reserve oz cost is something everyone can get their head around. So a book value breakdown might look like this (Total Reserve multiple by $1,000. I used $500 for McPhilly's), which represents around $4B worth of value.
a.) McPhilly's: $1B b.) Duketon: $2B c.) Tropicana: $800M d.) Cash and bullion: $240M
There is a lot more than the hedging policy going on here to explain the destruction in sh wealth. If RRL can't extract full value out of this portfolio, there is a massive opportunity here for someone with the right credentials and ambition. It might be the best outcome for sh's at this stage.
RRL Price at posting:
$1.79 Sentiment: None Disclosure: Not Held
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