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Redknight - I'm not sure your logical conclusion is as logical as you believe it to be.
I'm not overly concerned by what fair value is right now.
My investment case is what fair value will be in 1/2/3/5 years time. 28p or £800m will not be a fair value then, so that makes it a buy now and I've acted accordingly this week.
You need to realise that not everybody is looking for cheapness now and situations of short term high demand to offload into. That may be you but it isn't me.
I don't have a target price. I'll know when it is right to sell and if the story changes fundamentally I will of course need to reassess, as all investors should.
Your offer prognosis may well turn out to be right. It's part of my overall thinking. It simply has to be. Assuming a construction and production route only isn't taking account of all possibilities and misjudges the potential risks with an investment.
I haven't given any consideration as to when I sell in terms of price points. It depends on my interpretation of the price vs the story at any given moment in time. I can't tell you when that will come about. It may be on Monday or it may be in 2 years.
On the whole I think you have misread me whilst taking up your defence. I'm not trading to personal parameters. I buy what I feel are promising stories across the exploration to production spectrum.
So I'll stop there...
And for anyone reading this later today or tomorrow, can `I suggest you goi back and read my two posts at 11.11 and 11.28.
Then you will understand why you are holding SOLG and how exciting it could get...
Or you could read the posts of the guys who implicitly or actually state that SOLG is fairly valued at 28.5p...
Your choice
Have a great weekend...
I have loads of such friends...
None of them had heard of SOLG and more than half still haven't invested...
That last point is fair Colonel...
So at £3.47p I've overestimated by 52p and it should be £295p...
However, this all assumes CGP can stand their 15% of Capex...
Absolutely not going to happen, which is why they are certain there will be a takeover.
In fact looking at their finances and cash resources, they desperately need it and cannot let it run until construction begins...
So you're right Wyloo started with 30% but they still ended up paying a 458% uplift against a bidder that started with zero%...
Oh come on Bozi...
"I plan on holding as long as is necessary."
The logical conclusion of your argument is that SOLG is fairly valued at 28.5p...
So was it fairly valued at 41p on April 12...?
The answer is yes, because any price is the consequence of supply and demand.
You very clearly propose that SOLG is only worth 28.5p to you, otherwise you wouldn't be arguing the way you are and would be buying more.
I am very clear...for me...in a finite period of time...SOLG is worth what the successful bidder is willing to pay...
My analysis suggests that it could be £1.28.5p...or £2.28.5p...or £3.47p...or £7.11p...who knows?
We'll find out when it happens.
Wyloo WAS prepared to pay $1.10...BHP was not...
Cascabel is the most buyable copper/gold Tier 1 asset on the planet.
Anyone who thinks it will survive to the next AGM independent is IMO deluding themselves.
The only questions for anyone reading this are...
What is your target exit price (you have to have one, otherwise why are you here?)
What will you do if the SP gets to that level?
What price do you think a successful bidder would have to pay?
Of course my figures are just as hypothetical as Bozi or Lunch, but...
They've been confirmed by my contact and....at least they give a basis for determining your target price.
If you use Bozi's analysis you should consider selling now and certainly not buy any more, because 28.5p is the correct value for SOLG...
On Noront, they were not well known story prior to their takeover action, so their share price was entitled to be suppressed. They were highly illiquid and not really on any radars whatsoever, hence the widespread surprise.
SolGold however have and continue to be one of the best known development stories of the last decade. Traded on two exchanges with a global presence given the Australian domicility, South American assets and London stock market listing.
Redknight - yes, yes I do.
I plan on holding as long as is necessary.
That is the difference between me (and some others) and you (and plenty of others).
I am looking ahead based on a market valuation upon a construction scenario and you are looking ahead with a buy-out scenario, hence your comment earlier that you "confidently predict the first offer by the end of May".
Be honest RedKnight, what does 28p say to you about what the market thinks? To me it says,
'SolGold are low on cash and will need an injection in the short to medium term to keep boots on the ground on their fantastic portfolio of projects. The PFS showed some robust figures on quite a conservative plan and proved Alpala to be a top developing asset, with further value still to be added. Operations in the regional portfolio have been wound down until further notice which pushes future catalysts into H2'.
If that commentary doesn't point to 28p then I don't know what does.
Cheers mate
Your comments make it all worthwhile...
Lunchmoney, you're not Lowtrawler are you?
They've just devalued my analysis on ADVFN and then start the next post with...
"I am not an investor here and will not be investing here..."
Now THATS disingenuous...
Great post RedKnight-keep posting and ignore any detractors is my advise to you.
Still shell shocked at 25% drop in 2 days.
Like you this to me makes no sense whatsoever.
One day the market will wake up and smell the coffee.
Just wish i knew what was happening behind the scenes.
I hope DC's charm offensive in USA will help us pricewise.
Bozi....the funding is irrelevant unlees you are holding for the next two years...
Do you plan to hold until construction begins...?
Or to production...
Your numbers are just as hypothetical as mine, but at least mine put metrics on what Cascabel could be worth to a bidder.
Your point about the price being higher is just as relevant to why the market is putting no value whatsoever on a takeover right now...
My guess is that the SP is being held back by poor liquidity and low volumes...enabling the MMs to make a turn and keeping a cap in the SP for prospective bidders.
My analysis post a value on the prospective maximum worth of Cascabel to a bidder. This will help determine the outcome if their is a bidding war.
In my experience successful bidders ALMOST ALWAYS end up paying more than they intended for an acquisition especially if there is a bidding war.
Look at Noront.....
In May 2021 the share price was 24 cents....it had never made a profit in 6 years...
By the time the bidding war ended and Wyloo had trumped BHP it was $1.10....thats an uplift of 458%...
Do you think how Noront was going too fund their mining was relevant during this...?
The equivalent for SOLG would be 131p based on today's price...
LunchMoney- I agree with your point of view.
Redknight - you raise some fair points but with all respect you are applying a forward valuation based on economics that we hope will apply in 7 years time.
The market doesn't work like that. If it did, the share price would be the levels you quote right now.
To say the market doesn't care how this is funded is just plain wrong. Funding is the be all and end all for any resource company. Read across any company at pre production and pre construction stage. It's all about the funding and chiefly the debt/equity mix and also the cost of capital.
If the market really valued the takeover prospects of this company short term the share price wouldn't be down 30% in the last 14 days. It wouldn't be 28p. It simply wouldn't be where it is.
It would be 50p, 60p and even 70p in anticipation of bids closer to 100p.
All makes sense to me colonel...
Anyhow...time for a coffee and some glorious spring sunshine...
corporate finance...
I'm not babying the numbers...the numbers are real.
I'm babying the explanation. Not all of us have financial/corporate final experience...
Lunch
I totally accept the integrity of your intentions, but I honestly think hardly anyone on here is expecting to hold for 8 years or more...
However, those who did hold on to ATYM have made a fortune. I have a mate who invested £100,000 and now has almost £400,000...and is earning £25,000 a year from it pre tax...
"But the market needs to know how it can be funded?"
NO.
Only if 'the market' thinks there will not be a takeover bid, but...
In October 2020 SOLG was 'the hottest takeover story in town' and...
Several publications have now talked about a bid in May or June...
Do you think CGP, DGR, Newcrest or Blackrock are holding on for production...?
Lunch...mate...
"it is the financing that is key..."
Only Quady thinks this is going to production...
The financing is irrelevant...the only things that are relevant are:
have you got enough shares and...
Can you hold on until the bidding war starts...
You don't even need to hold on to be paid out by a successful bidder...just sell in the market for cash and buy yourself the car/house/boat/luxury holidays...etc. that you've always wanted...
And for the nervous among you, this is not another Sirius Mineral.
The only thing you should worry about is a 'Black Swan' event that affects all share prices.
In which case only invest what you can afford.
Anything different makes you a trader or, worse still, a gambler...
GLA
THE MARKET DOESN'T NEED TO KNOW HOW ITS FUNDED...
THE MAJORS JUST NEED TO SHELL OUT PETTY CASH TO BUY US...
Even at £1 a share its only $2.8 billion...
Thats less than 20% of BHP's cash in the bank...
Let m repeat...5 years ago...well before production...ATYM 80p...now 386p and yielding over 7% from ONE TINY MINE producing one tenth of what Alpala will be producing...
ATYM MCap £528 million...
Its not rocket science...
And on those numbers I confidently predict at least one bid before the end of May...
Lunch...
Why di you have to put on a negative spin...
The numbers I~ have put together are legitimate.
Of course discounted NAV is important for pure analysis.
The numbers I have used include actual cash being spun off at $2 BILLION a year after ramp up.
Thats serious money...
Its 250% of SOLGs current MCap.
I can assure you...sustainable cashflow is king for fund managers investing in shares...
I can't remember what the discount rate applied to the PFS is but I know that ALL the numbers are conservative.
The 10 year US Treasury rate is currently 2.85% and serious analysts say we are already in stagflation....
When you buy a car do you do a DCF before determining whether you can afford it.
My analysis is of legitimate value, because it demonstrates beyond doubt that SOLG is MASSIVELY undervalued and thats all that matters to the investors I am writing for....
Best wishes
So let me pull this all together...
The important point will be the P/NAV once all research analysts have updated their models and price forecasts.
I'm confident that SOLG will ramp up its analyst coverage now that the PFS is definitive and we may get revised estimates ranging from 55p to £1.35p or more...who knows...
Having looked again at the EBITDA in the PFS detailed figures, in the first 5+ years (after ramp-up) EBITDA can be expected to come in at $2bn, as a minimum.
Now remember that Atalaya Mining, with one small mine and a mine life of 13 years is on a P/E of 4.65; BHP 17 and ANTO 16.
So I think it is entirely reasonable to use a multiple of 5 times for SOLG.
That would mean an EV (Enterprise Value) of $10bn, equivalent to a Share Price of 347 pence.
Yes thats right, you read that correctly...
347 PENCE...and thats based on Cascabel alone...
Now do you see why this share price is bonkers... This gives an astonishing indication of potential upside over time (5 years plus).
Again for comparison, ATYM was 80p just over 5 years ago, about a year before production.
In February it hit 446p...based on one...small...mine...
So you can see why...
Quady wants Alpala to go to production
The current valuation of Solgold is insanely low
The revised PFS is so attractive...based on an ASSUMED copper price of only $3.60...some analysts are forecasting $15,000 a tonne or almost double that price well within the time frame above
Any major with depleting copper assets and/or gold assets would be playing a dangerous game by waiting too much longer before making a bid...
And if you want an idea how exciting this could get, read how Robert Friedland made himself a billionaire out of Voiseys Bay once the insane bid battle occurred...
GLA and happy as always to explain anything and have the figures challenged, but...
I have already had the above confirmed by my contact...
Red good homework there my friend
And will eventually drive the market valuation if a bid doesn't come before.
I quite understand that many on here will wonder what EBITDA, P/E, P/NAV etc and why they matter.
I apologise to anyone who may think that I am babying them, but the analysis earlier and what I am about to post show not only how ridiculously undervalued SOLG is, but also what will drive analyst/broker revisions and are the bread and butter for any major considering a bid.
So...to start with..
EBITDA is a measure of pre tax profit and it stands for Earnings Before Interest, Tax, Depreciation and Amortisation.
Investors and analysts alike tend to focus on three key measures:
P/E (Price to Earnings) this is calculated as to the Share Price divided by actual or forecast EBITDA
P/CF (Price to sustainable cashflow). The market capitalisation divided by the annual sustainable cashflow. This is important because its not lack of capital that busts companies, its lack of cash.
Finally, P/EV (or P/NAV) This is the MCap divided by the 'Enterprise Value' or Net Asset Value. This can be determined from the Balance Sheet. So SOLG's NAV at the last MD&A was $320.337m, so the P/NAV ratio was approximately 2.
The projected average annual cashflows from Cascabel are $743 million.
The current MCap of SOLG is $821 million.
So the P/CF ratio is only 1.1
That means that in an average year for Cascabel alone...it would only take 13 months to regenerate the entire market value of the company IN CASH.
So it doesn't take much to imagine how soon the company could [ay dividends. Certainly well before Year 5 of the project and possibly as early as Year 2 or 3...
From, say BHP's point of view, Cascabel would be enhancing their earnings by $1.2 billion a year and generating free cashflow for them of $743 million.
All sounds pretty amazing so far...
But it also demonstrates that worrying about only 3 million shares traded in one day is pretty academic.
If you are here as an investor, the numbers at the CURRENT copper price out of the PFS are pretty amazing.
One other example before I move on...
The CASH COST of the Capex is $2.7 billion...in an AVERAGE year Cascabel will be throwing off $743 million CASH which means the Capex could be repaid in just 37 MONTHS...
But it gets better...