Chris Heminway, Exec-Chair at Time To ACT, explains why now is the right time for the Group to IPO. Watch the video here.
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Fairbride, open mine is one thing, but what lies beneath is a whole lot bigger, the DFS only considered the open pit, or about 20% of the deposit, and Fairbride only a part with Dots luck and several other prospects yet to be fully explored. The Alluvials too, only scratching at the surface along the river.
IWTO
It's a gamble in that its not a certain bet. That doesn't mean its a huge risk. I guess it all depends on the what the judgement call is on future POG.
If MMP had taken the gamble just over 2 months ago, with POG much lower then, they would have 'won' in that the extra increase in POG on 23% share would be higher than the premium they paid in the buy-out.
IMHO the chances that they would 'win' the bet if they took the buy out this year would be 90% likely so imho not a huge risk. ie I think POG will be $200 + an ounce higher in 2 years than it is now.
Andrew, thanks for your response, which confirms my thinking. MMP would be “gambling” on a higher POG for a significant number of years, and/or more underground reserves. Neither are certain and would represent a huge risk for them, IMHO. If it were XTR investors faced with this decision, would we go for it? Not me.
LW
It's up to MMP if they exercise the option so we don't have the option of playing it either way, only MMP do.
If they do go for the buy out it won't be $20M. That figure used by IWTO (which I think is too low) was the cumulative income value of the 23% over 7yrs LOM and to show why they wont exercise the option as the option would be higher than the 23% total value.
My previous post hopefully explains why they may be happy to pay the premium buy-oy option.
IF they do go for the buy-option, I've calculated that the price would be about $30M against the NPV calc and current POG. As I think the 23% cumulative value is about $25M (not $20M as IWTO believes) there would be a $5M premier for MMP to pay (by my calcs) .
Whatever the exact figure is, it will be more than $20M for the buy-out against current POG
Maybe MMP can afford to play it either way... I'm not sure we can tbh. Anything near $20m may well be seen to be cheap a little way down the road but would be most welcome if it is weighed up against another SP damping raise. A bird in the hand is needed now.. not two or three elsewhere.
Hello IWTO
The 23% is not relevant to the NPV calc as that 23% is not part of the buy-out calc. However, I agree that the 23% is relevant to the decision by MMP to take the buy-out option. I disagree with your valuation of the 23% share as I think the total yearly income over 7 years would be a bit higher than $20M.
However, I do believe that against any consistent POG the cumulative 7 year income of the 23%, would be lower than the calculated buy-out option. Therefore why would MMP pay more against the buy-out option than the 7 years cumulative income of the 23% share? Which I think is your point.
This is the point Jamesiecakes made last week, and one which I agreed with at the time. However, since then, I have also done some calcs looking at the disproportionate increase in profit there is against higher POG. Dave85 also did his own calcs and commented on this multiplier.
The reason why MMP may offer the buy-out option would be because they think that POG is going to rise over the LOM and that the buy-out premium would more than be covered by the additional profit against the increasing POG. By my calcs that buy-out premium could be covered by POG rising about $150 to $200 an ounce within the next 2 years. It is not difficult to find many who think POG will break $2000 ounce within 2 years.
Just a point re a buy-out option. The buy-out option would always have to be at a premium to the 23% cumulative income as MMP have the right to exercise the option, so if it were not at a premium then then they would obviously exercise this option and CB would be accused of giving away assets on the cheap and not acting in shareholders best interest. So MMP would always have to pay more than the equivalent 23% income share (against a consistent POG). Why give them the option otherwise?
Also, and to a lesser extent, another aspect which may also be a factor is that CB has said there is potential to dig down at FB and the likelihood of higher grades. Although not as an important an issue as rising POG, this may also be a consideration to pay the buy-out premium.
In short, I think CB is saying to MMP do you want to gamble? On higher future POG and, to a lesser degree, possible better grades as they dig down.
I’ve posted very recently that if MMP buy out our 23% share some will think, on day one, this a great deal (possibly for the reasons you have stated – it seems MMP have paid too much and have been stupid) but within 6 to 24 months, against a substantially higher POG, I think we will look back and see it as a bad deal for us, and a good deal for them.
Maybe MMP will also see it that way to, so that’s why they may take the option??
AIMHO
Andrew - I'm only just catching up with all the debate about MMP's possible buy-out of the FB HR concession. The 23% IS relevant here because MMP already has the rights to 77% of the net profits (at current POG), under the terms of the collaboration agreement. The only point in exercising its right to buy would be to take over XTR's 23% free carry. On all sensible assumptions, the discounted value of that 23% is less than $20m - or perhaps just about reaching low $20m's but only on very heroic assumptions about the continuity of the current POG and confidence about the AISCs. grades etc etc. I can't see why they would do this.
Daz
When you get to the NPV, don't multiply that by 0.23%. 23% cut is not relevant in this calc. If it were we would never get a higher valuation than the $20M reserve price - unless POG went to $3K !!
Daz
There is a standard and recognised calculation to determine NPV. The link below is an on line NPV calculator. All the ones I have seen on line give the same answer (obviously when using the same assumptions) and was the same result as the way Dave 85 did his long hand calc.
Whether anyone agrees with the calc or not, is not relevant because I can't believe xtract and MMP will not be using the standard NPV calculation (and taking 80% of for buy-out figure). So to accurately determine the buy-out price we have to use the standard NPV calculation.
NPV Calcultor link:
https://www.calculatestuff.com/financial/npv-calculator
It appears you are not discounting the yearly cash flows. This % is the interest cost against the original capex and it makes a big difference if you don't take this into account. It greatly inflates the final figure if you ignore discount %.
As Dave said, there are assumptions when adding in the variables and some may disagree with the figures used for these variables, such as, Capex, yearly cash flow and, LOM. You will obviously get a different result using different assumptions but the basic NPV calc should be used - which has a discount rate compounding each year.
If anyone has an NPV price more than $45M (using NPV calc) I'd like to see what assumptions they used. I may have missed something in my assumptions.
Thanks a lot for all the info, andrew4444
ATB
Hello Dave
Further to your post re NPV afew days ago, I have looked at other on line NPV calculators and they have all confirmed your NPV figures using your same assumptions. However, you may want to change some of your assumptions.
1. CB has always dismissed the $40M capex as this was from a quotes which, in his opinion, would always be inflated. He has said last year he thinks extra cost is about $14M to upgrade Omnia’s plant. I believe the Omnia’s plant cost about $11M so total capex of plant should be about $25M. CB did say 2 years ago he thought the $42M capex could be about halved so $25M capex does seem more realistic.
2. At the AGM last year it was reported that CB confirmed we would not get full POG but 85% of POG as sale is in Dore bars. This would reduce the year 1 cash figure, and obviously future years.
3. Also at the AGM it was reported that we have to pay $17K per shipment of Gold and there will be 2 shipments a month, so $34K a month.
4. Finally, in the 29 May RNS it stated that we will receive $20K a month from MMP when production starts.
Not too sure if 3 and 4 effect the NPV calc but obviously 1 and 2 do.
By pure chance, the revised calc total doesn't change much, as the positive at no.1 equals out the negative at no.2. So still circa $40m NPV so $32M buy-out = £25M buy-out .
Of course that figure is at 12:09 today. Maybe higher in 1/2 an hour :)
Hi CE thanks again, just to clear up the meaning of my previous post.
Also just noticed the bit in my first post today re CE neglecting exchange conv was wrong, must have miss typed something into the model at some point as my 1575 results dont match as stated earlier.
Would have been clearer as
Also just noticed the bit in my first post today re CE neglecting exchange conv, was wrong, I must have miss typed something into my model at some point as my 1575 results dont match anymore as stated earlier.
Certainly catching my interest more and more as I increase my familiarity. How long before disconnect gets widely noticed, guess news will do the trick or maybe just pog some specation re gold projects less advanced than ours is absolutely rife atm.
Managed to get some more sub 1p yesterday.
Happy to see where this goes now, back in profit after a long long time currently.
AIMO ATB
Yes, POG does look like it is still on the up = $1,610 today!
At this price it must be possible for even a half-wit to make money out of a gold mine...So at least we have a chance!
Just broken $1600 and rising.
The delay in news here is probably due to MMP/ CB trying to agree buy-out price. Every time they think they have agreed a price POG and therefore NPV goes-up and they have to start again :)
Hopefully that's the reason !