RE: Big Blue Day3 Oct 2019 20:31
The primary benefit of the EPO is that is stops ZimGov from giving it to a competitor (e.g. Chinese), so it protects PREM's market position in the event they can actually develop what they have to be a working mine. Subject to getting the right partner on board I would hate to see another large scale exploration project commence across the area covered by the EPO. Start mining what we know is there based on previous exploration , actually get cash generative, and then look at carrying out some more prospecting in a few years when we are cash generative. A number of people have commented that the new EPO area is 50X bigger than what we already have so the value increased 50X. Similarly people are saying the value should be 1% of the in-ground reserves. That is not how minerals are valued. Ultimately the area over which PREM already has a licence is large enough to take 20+ years to mine. The valuation will be based on a discounted cashflow of what the revenue stream of mining that will produce and a heavily discounted estimate of the reserves. If it is physically impossible to mine a significantly larger area it will not substantially increase the DCF valuation, but it will increase the hugely discounted reserves element of the valuation, though as these are hugely discounted, it does not massively impact the valuation. What it achieves is market position. We still haven't seen formal confirmation the EPO has been granted and I wouldn't trust GR as far as I could throw him. His abuse of shareholders over the past number of years has been close to criminal. He has raised the best part of £30m and not delivered a single £1 of shareholder value, whilst ensuring his wages and admin costs are always covered. His expenses claims alone are ridiculous and I would love to see them audited. When we have formal confirmation of the EPO and someone who knows what they are doing is running the company I will sleep much sounder.
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