Nuinsco & their spin-off company Victory Nickel are valued at $3.50
Q&A for Nuinsco & Victory Nickel - January 30, 2007
Ok, this is a compilation of repetitive posts that are on NWI’s board, but since we have many new investors on board, or those about to come on board, there are plenty of relevant questions, most importantly... "how much will the new shares be worth?". I’ll post and re-post this for all new investors until the spin-off on February 6th, the first day of trading for new Nuinsco "NWI", and Victory Nickel (spin-off of Nuinsco's nickel assets) "Ni" symbols.
Here's a little Q&A session for Nuinsco and the soon to be trading Victory Nickel Company to be spun off from Nuinsco.
Q – Is this an IPO?
A – No, this is not an IPO. In an IPO, a corporation sells equity to shareholders. Nuinsco is not getting anything in return for the shares spun-off except for an ability to increase total market capitalization. They are doing this so that the market can fairly value its true worth. If you want to own Ni before it starts trading on February 6 you must buy NWI before the close of trading on February 5.
Q - Is now a good time to buy in?
A - Yes, now is an excellent time to buy in. Current share price is trading at only 34% of what executives measure this company to be valued at when compared to peers in the market.
Q - If I buy, what do I get?
A - If you buy now, you get all of Nuinsco's assets as a package deal.
Q - What happens during the spin-off?
A - For every share of Nuinsco (NWI) you own, you will get the same amount of new Nuinsco shares which will continue to trade on the TSX under the same symbol (NWI), in addition you will get .75 shares of Victory Nickel shares which will also trade on the TSX under the symbol (Ni). Ex. You buy 4000 shares of Nuinsco on Monday, post-spin-off you get 4000 shares of new Nuinsco (NWI), and 3000 shares of Victory Nickel (Ni).
Q - Am I getting free Nickel shares? I don't get it. (Don't worry... I've seen this question posted too many times on this board.)
A - Nothing comes for free. I've said this before, and I was correct in likening this to a share split. And, no, there is no 'real' dilution since all shareholders retain the exact 'real' equity that they owned prior to the spin-off. If you own NWI before the spin-off you own all of Nuinsco's assets in one stock. After the spin-off you still own all of the assets of Nuinsco but they are simply kept in two different stocks instead of one. Simple enough?
Q – If I buy the stock today at $1.50, what will the new stocks be worth after the spin-off?
A – Let’s pretend that the share price does not appreciate any further (which it more than likely will) until the spin-off date. As in the prior example, you buy 4000 shares at $1.50 per share. In total you own $6000 in NWI shares. Remember, this stock includes all of Nuinsco's assets. According to management, the new stocks when compared to peers should be valued at $2 each. This will not happen overnight (if it does... cool... but it probably won't). So, pretending the share price remains the same, the day before the spin-off at $1.50, your new shares on the first day of trading both shares will be worth exactly $0.86. How did I get this number? Easy - Prior to the spin-off, you owned NWI worth $1.50 per share, which equalled $6000 in total. After the spin-off, you will own 7000 shares in total, 4000 of the new NWI and 3000 of the NI shares. We know the new shares should be valued in the market at equal prices according to management. Therefore, you simply take your original total equity value of $6000 and divide it by 7000 shares. That gives you a price of $0.86 for the new NWI share, and $0.86 for the NI share.
Q - What is your target price for NWI if it remained as a pregnant stock? (Whole share - prior to spin-off)
A - If NWI remained intact, we would probably never see this price. As management, under advice from several sources have declared, the best method to unlock the value of Nuinsco is to spin-off its individual assets. But, once again let's pretend NWI remained intact. $3.50 would be the target. Spin-off NWI priced at $3.50 and you get new NWI at $2 and NI at $2 just like management claims they are worth. This is a realistic, yet very conservative target price since the company has discounted the price of nickel to only $7 per pound instead of using the current $18.10 spot price per pound of nickel quoted at market close yesterday. Compare this stock to FNI and you find the pregnant NWI stock price target increases to $4.15. Resulting in the new NWI trading at $2, and NI at $2.87 (see my prior post comparing NWI to FNI). Increase the valuation of nickel from $7 to today's present price of $18.10 and you have some pretty crazy numbers (double digits for pregnant Nuinsco)... and bet on NI trading at least at $7.50 per share or more. Add some uranium (of which Nuinsco is speculated to be on the verge of discovering a super deposit) or gold news to the new NWI stock, or an increase in investment earnings from Campbell Resources, or the announcement of a significant exploration discovery shared 50/50 (as per agreement) between the two companies and the NWI share price goes up significantly. For now though, $3.50 is on the low, achievable and very conservative side, while $7.65 is temporarily on the high and expensive side. Significant uranium news will easily put NWI into a double digit trading price.
Some Fundamentals for Investing into Nickel:
1. Developing countries such as China and India are creating a real strain on nickel supplies, in their production of stainless steel, batteries, whatever else nickel is used for.
2. The level of stored nickel as tracked by the LME Warehouses in London now sits at 4278 tonnes. This indicates that there is under 4000 tonnes available for delivery which is just about the daily global consumption level of nickel.
3. X-Strata's Sudbury nickel mine is in its eleventh hour of labour negotiations. February 1st, they may be going on strike. The union and the company started talks again yesterday after failing to agree on the earlier proposal last week. X-Strata has announced that they are preparing for a strike since the last set of negotiations failed.
4. CVRD of Brazil, the new owners of Inco are reaping the rewards of these higher nickel prices. The company said it is budgeting $6.3 billion for research and development, maintenance and acquisitions this year. This is blue-sky speculation, but since Victory Nickel has over 600,000,000 lbs. of M&I nickel resources, it's hardly a long stretch by any means.
5. Canadian Government is aware of the nickel situation in the globe. They announced a plan to encourage further exploration of resources and mining development in Canada. Canada has an estimated 30% of the world's nickel supply, while Russia is currently the largest miner, and Australia does it cheaper than anyone else. Victory Nickel has a relatively low cost of recovery calculated in comparison with other mines that are in operation today.
6. A little less significant, yet it is still a headline grabber, cargo ship carrying 1,000 tonnes of nickel had to be intentionally grounded last week in order to save the cargo. Recovery of the cargo has not been reported as of yet.
Q - What else does NWI have going for it?
A - It's about time you visited Nuinsco's website and did your own research.
I hope this helps,
‘O’ |
