FAR summary (in my view)21 Mar 2021 20:50
* The management ****ed up the IPO and didn't raise enough money to complete even the existing operations.
* Mr Market saw that they needed more money, and were seriously overvalued at 50p+ without a funding deal for the main mine, and sold/shorted the shares down to sub-10p. A US-based large insti investor lost patience in 2020 and started dumping their holding, further hitting the SP.
* The economic case and NPV of FAR's main mine project are **unchanged** by all the share price shenanigans over the last 2 years.
* Mick Davies recognised the astonishing economic case and has driven a hard bargain to invest at 9p. But FAR's management were beggars and couldn't be choosers. MD's investment (including the $30M future buyins) has not only made the Phase 1 mine now almost guaranteed, but has brought enormous credibility and experience to the project.
* The actual levels of dilution from VBR's investment package, even including the later $30M, are not excessive - about 50% extra shares. This is because much of the package is at higher share prices, up to 78p. VBR, having guaranteed themselves a profit by putting in millions at a rock-bottom 9p, probably came under pressure from FAR's management to make the remining money at much higher prices as a 'quid pro quo'. VBR's eventual 'average' buy-in price, including the $30M, will be around 25p, which is still an astounding bargain, but also reduces risk for themselves by only committing them to the $30M when risk-reducing milestones have been achieved.
* Every mine faces 4 risks: economic, financial, execution and political.
* My view is that the financial risk is now all but eliminated with Mick Davies' investment. His $30M commitment will easily be enough to ensure a debt funding package for the Phase 1 mine at least.
* My view is that the execution risk (ie. actually building the mine) is now very low also, with Mick Davies as Chair with his huge experience. Of course the risk is not zero, there is always a risk of accidents of 'black swan' events etc, but nothing in life is risk-free.
* I believe that the political risk in Kazakhstan is low. Many Western-listed and Western-based miners operate there, seemingly without too much trouble. In the longer-term who knows what politicians will do. But it is not in the interests of the government to be too corrupt or to engage in actions which might deter Western investors, and the large tax payments generated (as well as thousands of jobs) by Western investments.
* The economic case is dependent on final BFS, and the long-term V price. But FAR's unusual deposit type, and the innovative processing routes they have created over years, is a production cost so low that they will *always* make a profit and will *never* go bust. This is a massive safety blanket. Assuming the mine is built, even at unfeasibly low V prices (say sub $5) the eventual share price should *still* be multiples of 40p.
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