A NO Vote is not rational9 Jun 2017 12:06
I will lay out my case why i think it is not rational to vote No.
1. We only have a minority stake and turkey is not very attrative as a buyout target destination at the moment, so it could be a long time before we get another offer.
2. In case the Vote is no i guess we will go down to 1-1,2 then.
3. My third point is most important:
You can take your Mariana win and invest it in another similar quality asset: For that i suggest Nevsun Resources. Their Timok project is top notch and is of similar quality as Hot Maden and has a very similar NPV (both have Peas out). You currently pay 47% of the HOt Maden NPV if you calculate the Mariana market cap with Sandstorm at 3,8 USD in case the takeover goes ahead.
If you buy Nevsun you pay 53% but you get much more. They have 200 mio usd in cash and 46% of Timok lower zone (jv with freeport which could be a big block cave mine in the future). They also have 60% of the Bisha mine in Eritrea. (they have some problems with seperating a cu concentrate from the zinc concentrate if i am not mistaken).
My suspicion is that Lundin Mining (they have over 1 billion cash and a rich curreny (high share price)) could make another run at Timok with a Nevsun buyout offer and sell the Bisah mine to the chinese or similar.
I made some assumptions for a takeout scenario for both Mariana and Nevsun:
Both assets get a takeout price of 80% npv + cash on hand - debt. Then i assume that the Eritrea operation can be sold for 150 mio usd. In case of Mariana i valued their other portfolio with 15 mio. In that scenario you would make 98% if you buy Nevsun from here, but only 80% with Mariana at current prices. But with Mariana you have much more risk in my opinion.
I would have preffered a full value takeout like all of you but honestly the deal is not bad. You get a Sandstorm shares wich have gone under pressure because of the takeover and also the GDXJ rebalancing, the pressure should be off soon. They have transformed into a serious company over the years and are also fundamentaly sound and undervalued.
Why not take the money and invest in another undervalued high quality opportunity like Nevsun considering that the downside of a No vote could be something like 40%? With Nevsun you get more payout and a better risk profile from current prices. I will repeat: A NO vote is not a logical decision in my opinion. Any input welcome
cheers