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Alta - you are most welcome.

Very interesting to see your trajectory models gave an MT valuation of 75p - 115p as this correlates reasonably well with the NPV model for MT flanks at discounts of 15% - 20% (87p - 121p). Lots of other valuations based on estimated resources in the ground have also been indicating a similar range.

I am with Nitrokev - let's just call it £1 ..!!

Plugging in a few discount rates I got the following valuations for MT flanks, (all based on the ACF cash flow assumptions):

WACC Value per share
12% 149p
15% 121p
20% 87p
25% 65p
30% (as ACF) 50p

Hi Alta,

I agree the NPV approach requires a leap as the mine is not in operation. I would imagine prospective buyers will want to use a fairly significant discount factor as they are taking all the risk of getting into production. Maybe 15-20%?

To make the calculation, I took the cash flow figures from Exhibit 10 of the ACF report for the MT flanks and applied the discount factor as follows:
For Year 1, (cash flow)/ (1 + discount%)
For Year 2, (cash flow)/(1+ discount%)^2 [squared]
For Year 3, (cash flow)/(1+discount%)^3 [cubed]
and so on.
Then the value is the total of all the discounted cash flows.

If you are a spreadsheet fan (like me), you can set this up in a sheet so that you can change the discount % and it will recalc automatically.

Hope that makes sense!

Alta - it's a Net Present Value calculation so the discount is applied for each year into the future at a progressively higher rate, not as a blanket discount. So it doesn't max out at 60.6 x 1.3.

RMR - it means they applied a discount factor of 30% per year when calculating the value today of cash flows in the future. (The discount factor is also called the WACC or weighted average cost of capital, i.e the cost of money. )

So, using a WACC of 30%, money earned in 1 year's time is discounted by 30% (divided by 1.3), money in Year 2 is divided by 1.3 ^2, Year 3 divided by 1.3^3 and so on. Obviously, the discounted value of cash in the future is hit dramatically at such a high WACC.

Using ACF's cashflow projections but with a WACC of 12%, gives a valuation for 80% of MT flanks of £ 4430M at an exchange rate of $1.30, compared to £1476M for the WACC of 30% as shown in the report. Dividing by 2967M shares this would be 149p per share.

RMR - I posted this revised calc for the MT flanks a while back based on adjusting the ACF figures. Obviously the ACF NPV is based on the mine being in production ....

Once the MT Flanks license is issued, the risk factor is obviously reduced and the value is obviously increased. For example, applying a discount factor of 12% to ACF cashflow figures for MT Flanks, I calculate a revised valuation of £4,430m for EUA's 80% share which equates to 149.3p per share, assuming £/$ of 1.30 and 2,967m shares.

Johnk - you are aware there is a formal sale process happening ...? I would say that is more than a rumour of potential buyers !!

Dale - just a view based on similar processes

Yes exactly Ferg - as others have said already 3 months would be a reasonable period for a sale process.

As we are now 8 weeks from the start of the FSP I would guess that final offers could be on the table. Perhaps explains why the MT flanks RNS was brief because it's just not important any more ...

It is going to be a massive 3 weeks ... IMO!

The company has to have an AGM as usual but the date will surely have been set in agreement with UBS to align with the conclusion of the FSP ...

Everest - agreed!
The RNS didn't exactly sell it considering the MT flanks license has been long anticipated to say the least. Hopefully this means there is bigger news being worked on ...

Well done Spitfire ...
Pretty sure that "Department for Subsoil Use of the North-West" is SevZapNedra

If the MT flanks is confirmed I am expecting this to re-rate into the 40s ...

The ACF valuation of 54.8p - 60.6p included the MT flanks but at 30% per year discount due to the risk of the license and EPC contract not being in place.

Very poor taste ! I should have resisted. :[]

Ferg
According to google translate north west in Russian is "severo-Zapad" ... the licensing authority for MT is Sevzapnedra.

Thank goodness for that ! (It would have been literally unbelievable!)

I assume the actual data room includes 3D models of the MT assets built up from historical records, presumably that is what Absolute Precision were assisting with?

Mac - you are saying you have access to the data room for the FSP ..?

No problem avfc - yes previously the owner's name was given as Ananieva, believed to be the wife of one of the Ananiev brothers who were/are linked with Promsvyazbank. There was some rumour that their assets could be taken away I think.

See the RNS from 22-Jul-20.
"According to the information available to the Company, the ultimate beneficial owner of Queeld Ventures is Galina Pchelkina."

Presumably we will find out who the ii is when they have to declare their >1% interest under the FSP rules ...

33,927,057 new ordinary shares (the "Placing Shares") will be issued pursuant to the Placing, representing 1.23 per cent of the Company's fully diluted share capital of 2,758,701,681 ordinary shares, as enlarged by the Placing.