RE: Let’s hope they create value for shareholders!4 Oct 2023 06:34
Interesting post from another place, suggesting all is not lost, implying major shareholders will be supportive ....
There was a warning sign from the last cost overrun raise, a useful average down, and now we have another monster one, which Cannacord estimate at $175m, which might need a 1 for 1 equity raise.
Without doing a lot of arithmetic, it seems to me that the current sp is driven by the marginal retail investors heading for the door, and are an overreaction relative to adjusted NPVs, which drives rational pricing. Down at 40p this am for example.
What matters now is what Glencore, La Mancha and Orion do now. It’s very likely that they will cough up. If they play in a raise at say 30-40p, then I’m in. If an existing shareholder doesn’t play, then they will at best get their money back.
I won’t be able to get close to the details as to what’s gone wrong here - essentially I’ll have to rely on the judgements of the cornerstones and what is said in the docs justifying the next issue. In the unlikely event that they continue to back Jeremy Martin, for example, then I’ll go along with it.
Looks like an interesting opportunity coming up for a non-investor and a must-do for an existing investor.
f you knock $175m up front off the NPV8, you get say $900m npv and if you knock off 20% for a P/npv adjustment, that gives you £550m “in production” value for Araguaia 1. If you assume it’s a 1 for 1 equity raise, the share count goes to 520m, so diluted a whisker over £1 a share. Investing in a raise at 30-40p seems quite a decent proposition. Maybe there are financing alternatives which reduce the weight on the equity eg a convert subordinated to bank debt. Probably a current investor has to double up to make something out of this.
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