Re: Dalradian14 Dec 2016 10:33
Think we are owed an RNS from MIO now that the DALR feasibility study has been firmed up. Surely the 2% NSR royalty that MIO has on the DALR property is now worth much more than a footnote in the accounts.
The Dalradian feasibility study appears to give support to MIO's valuation. Looking at the calculations for year 2 of operation, revenue is quoted at $164.2m and refining and transport costs at $10.3m so MIO's NSR (net smelter royalty) seems to be a minimum of 2% of the $153.9m, that's $3.08m in a year or about 0.51p per share per year after currency conversion. The first year is less favourable and the lifetime of the mine is obviously important, though it's predicted at 10+ years and may be significantly longer at up to 24 years.
Anyway at MIO's current price of about 1.375p that's a P/E of 2.69. Obviously the cash is far from being in the bag with the usual uncertainties in a proposed new mining venture and it would be better if the gold price was the assumed $1250 per ounce than just above $1150 which is the lower bound for their calculations. Their working exchange rate of $1.20=£1 is now slightly less favourable at 1.26. The AISC is very competitive at $674/oz for gold.
MIO could use the money to finance development of its existing mining properties. It looks set to lose c$1m dollars this year but at that rate it would still have $2m to spare or could increase exploration by 3 times.
Of course DALR might try to buy out MIO's 2% NSR. There's a very guarded discussion on this at the very end of transcript of DALR's discussion of the feasibility study, suggesting the 2% royalty held by MIO might actually be under negotiation with the phrase 'if the price is right' used. The other 4% royalty is not regarded as negotiable.
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