JR1 Jan 2021 15:12
JR,
Can you please comment ref your post on EUA on 3 Dec?
“It's not too hard to give a rough valuation of most of EUA's assets in the ground - take the volume of the resource (15m oz) and look at the value, ie market price, of an oz in the market (c$2400) and deduct the all in cost of extracting each oz (let's be cautious and say $400 per oz, when it likely begins with a 3 from what we've already been told.) So fully extracted and sold in the market each oz is a profit of $2000. Multiplied by 15m oz and you get $30B for the fully extracted profit in mining all the Pd. Then apply a pretty crude metric from say the O&G sector, where reserves are worth about 10c on the dollar unextracted but proven in the ground, and you get $3B. Then add in quite a bit more for the other minerals and you're probably closer to $5B. Which is about £3.5B for the sake of argument. So, we're still very far away from thatat 42p per share and a mc of around £1.2B. And then you can apply some kind of multiple in excess of 1.0 to that figure based on this being the last major available unconsolidated palladium resource in an area relatively cheap to mine, with not the worst (ie African continent) political backdrop. And then you consider that the Pd market is in deficit and so the price will likely continue to rise above the current spot price for the coming years. And add in some extra percentage for the FOMO for places like China which desperately need raw resources. Those simply back of an envelope calculations indicate to me there's still money to be made here for both the buyer and us as sellers, in a well-negotiated takeover. Now, I've no idea if DS will sell for a bit below what it's worth because he's gonna be SUPER rich anyway and needs a t/o to liquidate his enormous holding here, or if he is gonna play chicken and risk going into the new year, not getting a deal and we have to mine it ourselves. A much longer, craggier path but with ultimately even more reward. If I was China, I don't know why I would not be willing to pay say a 25% premium of the NPV of the assets (and that's before we've factored anything in for the remaining 25m oz Pd which are potential resources.) Then consider the Rhodium of which we have vastly less than 15m oz, but at an extraction cost of $400 for that, and spot prices of around $16k per oz, you're talking about a mineral which is c.97% profit for us! The numbers are extraordinary. The fact that we were an AIM tiddler until a year or so ago is a bit irrelevant, as are the metrics of previous deals. But I should add that I believe my numbers are extremely conservative, and hopefully overly conservative given the nature of our last unsonsolidated Pd play focused on a metal which has a significant supply deficit projected over the coming years”
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