Financing31 May 2020 09:45
Hi all,
A question for the experts. (Apologies if it has been asked before). How should I estimate the equity value HZM will keep as part of the financing?
My thinking so far is as follows. For simplicity I assume: Araguaia financed at project level, NPV8 = $691m, capital costs = $443m, 60% debt finance = $266m, 40% equity finance = $177m, ignore the Orion royalty. Basically you end up needing to raise $177m of equity finance against $425m of residual NPV after subtracting the debt (noting residual NPV would be higher if cost of debt is lower than 8%). If I was providing equity finance to the project, I would invest on the basis of achieving an IRR or x% (maybe 15% or 20%), so that would mean the remaining NPV to HZM might be lower than the $248m difference between $425m residual NPV and $177m equity finance requirement. How should I think about this?
Any guidance, or even references to case studies, similar financings by junior miners would be gratefully received.
Apologies for the detailed post. Thanks in advance.