So that would be around 25 to 30 Cdn. dollars per share, give or take
In a buyout situation, if we can make the case that we can sell our entire production to the nuclear market, yes I believe this is a fair range.
I asked AI for a buy out range for a $2.5B NPV project with high margins, this was the answer:
Determining the buy-out range for a mining project is complex and highly dependent on unique project variables. While a $2.5 billion Net Present Value (NPV) is a key indicator of a project's potential, it is only one piece of the puzzle. The purchase price for a high-margin project will typically fall within a range of 50% to 150% of the calculated NPV, but this can vary significantly based on multiple risk factors.
Why is there a range?
A buy-out price is not a direct purchase of the NPV calculation. The NPV is an academic estimation of value, while the final price is the result of market negotiation and risk assessment. A buyer will pay a premium for factors that reduce risk and increase confidence in the cash flow assumptions used to derive the NPV. Conversely, buyers will seek a discount for factors that increase uncertainty.
Factors that push the price higher (premium)
- High margins and low costs: As you mentioned, high margins are a very strong selling point. A low All-in Sustaining Cost (AISC) relative to the commodity price reduces the risk of future price volatility and increases the predictability of cash flow.
- Advanced stage of development: A project that has completed a Feasibility Study and has all the necessary permits in place is a more certain investment than a Preliminary Economic Assessment (PEA) project. A more advanced project will command a higher price, potentially over 100% of the published NPV, as the buyer does not need to spend time and capital on de-risking the asset.
- Experienced management: The expertise of the project's current management team can add value. If they have a track record of building and operating mines, it provides the buyer with confidence.
- Tier-1 jurisdiction: A politically stable and mining-friendly country reduces geopolitical risk. Less risk means a higher valuation.
- Strong infrastructure: Existing access to power, water, roads, and a port reduces the upfront capital expenditure and operating risk.
- Exploration upside: If there is potential to expand the resource and extend the mine life beyond what was included in the NPV, it is a valuable asset that will increase the purchase price.
- Scarcity: If the commodity is in high demand and there are few attractive, undeveloped deposits available, a buyer may pay a premium to secure a long-term supply.
Looking at those factors, we are in great shape. Like I said, people with money are going to start looking at this. They will take more time to come to a conclusion but when they do, our share price will get rerated. We should be trading at 20% of NPV which I guess using the old PEA we are but Peter Wood is changing those numbers very quickly here and the market is not paying attention. As we derisk this further, we move up the % of NPV.
Good days ahead!!
G. |
