Hello, 1) EBITDA is not earnings. The NPAT / FCF is the earnings...

Hello,

1) EBITDA is not earnings. The NPAT / FCF is the earnings and will be much lower after the 'I' T' & 'DA' are subtracted.

2) You'll have to start throwing away your NPV8% references - that's for the bankers to make decisions, not for the prevailing share price valuation. Equity cost of capital for a smallish mining (i.e. risk) venture would be closer to 12+%, this makes a big difference to valuation. I'd say something like 8x FCF will be the price eventually (not 8x EBITDA...).

3) Now time to add some big discounts to the above. It is not yet an established operation, it's in early ramp-up/commissioning. Rubber yet to meet the road, so the market needs to discount significantly - and it needs to be a very significant %, the variability in this discount selection makes a market - but it's applied across all development and ramping mining projects, SFX is no different. This will unwind gradually after a couple of years of successful operation etc to see what the actual profits are. They will be different to the DFS. The DFS is an estimate with error bars either side. Risk needs a price. Look at STA as an example.

4) A big one that is often missed - time cost of money in development projects. If I offer you cash flow in 1 year, 2, 4 years etc - it needs to be discounted (this 'no cashflow phase' is not taken into account in the discount rate/equity cost of capital..). You can place your money in a savings account or bonds and get a return, so if you plough it into a company with no returns = that's time cost of money. In saying that, SFX's time discount isn't too large anymore now cashflow is reasonably close.

5) SFX have to fund Stage 2 yet -- $$$. That money isn't getting returned as cash flow to holders... If things go well (and so far, so good ) they'll be able to get some of Stage 2 funding as debt instead, find a safe balance, which will be a win for shareholders. Cost of debt will be cheaper than equity cost of capital = share price benefit.

I'm impressed with the news flow over the last 6-12 months, hope that run continues for SFX.