Duluth Metals Ltd DULMF

RE: RE: RE: What Is DM Worth Per Share?

[mayorkgh]

Shareholders own 100% of DM. Management summarizes the transaction as follows:

Duluth will contribute the Nokomis Project and approximately 5,000 acres in the Duluth Complex for a 60% interest in the joint venture, with Antofagasta to acquire an initial 40% interest

The agreement, when exercised, calls for Antofogasta to acquire a 40% interest with the payment of US$130 million over 3 years. It is structured so that there will not be equity dilution. If 40% is deemed to be worth 130 then 100% is worth 325. Below is an extract from Wellington's analysis:

Deal terms drive NAV10% expansion; enhancements to our production model provide further boost. We estimate that the proceeds from the option payment should account for Duluth’s equity contribution, thus eliminating any potential equity dilution. We also assume a higher mill throughput rate. These changes increase our company NAV10% estimate to $6.09/share from $4.28/share

previously. We have adjusted our model to reflect the sale of a 40% stake in Nokomis, with US$130mm in proceeds applied to help fund Duluth’s share of development costs. We also assume that Antofagasta will exercise an associated option to acquire another 25% of the project at a price of US$277mm (see below). We had previously modeled Duluth maintaining a 100% interest in the project through production, with an accompanying substantial equity dilution, assuming a $330mm (net) raise at $3.50 per share in early 2014. We assume 70:30 debt-to-equity project financing, but conclude that the option payment from Antofagasta will fund Duluth’s share of equity requiremen