RE: 7.94mill NOT a sell, answer is you no one knows10 Sep 2019 21:07
Some top posts tonight, thanks all!
Thought it was worth exploring the potential impact of the debt/equity raise required to get Araguaia going;
Total funding needed; $443m
Funded by 65% debt, 35% equity, as per several statements by JM.
$443m * 0.65 = $287m of debt, leaving $156m of equity.
Equity dilution of $156m @ an exchange rate of 1.25, would equal £125m of dilution.
For arguments sake, assume the HZM market cap is equal to today’s £70m when the transaction takes place. The total equity after the £125m raise would be £195m, the original shareholders would therefore own 35.9% of the new total shares in issue.
Crucially though, this would unlock the full value of Araguaia, and so our market cap should theoretically re-rate to be valued at the NPV of future cash flows.
The NPV of the Araguia project assuming 100% ownership and $18000/t nickel price is $885m, again assuming 1.25 exchange rate this gives it an NPV of £708m.
£708m *0.368 = £254m value to original equity holders. This equates to 17.5p per share.
So even in a pretty negative scenario, current shareholders would see a 3.5 x return. And this completely ignores stage 2 of Araguia & Vermelho.
If the equity raise is done at the equivalent of 10p (as per JM this was the value of the Orion deal), current shareholders would retain 52.8% ownership in the new market cap, worth £373m, or 25.8p per share.
All pie in the sky for now, but look at the history of Solgold before dismissing the chance of us being there this time next year :)
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