RE: RE: RE: RE: RE: What Is DM Worth Per Share?Details of the transaction are summsarized on slides 5 and 6 of the January 10th Antofogasta Presentation found at DM's website (
https://www.duluthmetals.com/s/Home.asp). The January 14th analysis by Thomas Wiesel Partners is as follows:
Valuation: Our revised valuation assumes that Antofagasta exercises their right to control 65% of the
project. The funding provided to Duluth adds $2.50 per share to our previous $5 per share NAV. Due to the increased flexibility provided by the Antofagasta JV we have up-scaled our model to50,000tpd (from 40,000tpd) to reflect our opinion that a larger scale operation would be the most likely outcome. This adds $2 per share and result in an NAV of $9.49 per share.
Recommendation: We continue to rate Duluth Overweight and are increasing our price target to
$9.50 per share (from $5 per share) based on our NAV.
DULUTH FULLY-FUNDED TO DECISION TO MINE
We are increasing our 12 month price target on Duluth Metals to $9.50 per share (from $5 per share) following the announcement of a joint venture with major London based mining house Antofagasta to move the Nokomis deposit towards production. We believe the deal is attractive for Duluth and unprecedented in the metals space. It is an unusual transaction with most majors generally waiting until after a company has completed its Definitive Feasibility Study or
permitting phases before they pounce. We believe the transaction will provide sufficient funding to a decision to mine and should Antofagasta take a further 25% sufficient to move the project into production.
Details of the Deal:
? Antofagasta will take an initial 40% interest in the Nokomis project for US$130. These payments will occur over 3 years. It also holds an option to acquire an additional 25% for 1x NAV of the Definitive Feasibility Study.
? Antofagasta has also committed to provide up to US$85.7mn in additional funding for potential overage expenses and other purposes. This consists of Antofagasta contributions of US$55.7mn and US$30mn provided to Duluth if needed. It is worth noting that Antofagasta is providing this additional funding at 65%. The additional funding provides flexibility to accelerate the Nokomis project.
? Antofagasta will also subscribe to a private placement of US$11.6mn at $2.00 per share.
? Therefore, the total funding commitment from Antofagasta is up to US$227mn
? Antofagasta is also committed to pursue project financing (debt) on a common basis with Duluth in respect to the large development capital cost financing of the project.
? In the event the JV decides to order long lead time items Antofagasta is willing to provide additional funding.
? Duluth retains 100% ownership of its approximately 15,000 acre of grass roots exploration ground in the Duluth Complex.
? We spoke with Antofagasta and they consider Nokomis an excellent development prospect. They originally commenced looking at the project at the PDAC mining conference in 2008 and have conducted numerous due diligence trips to site. Antofagasta’s technical team will review the project and work directly on the development of the Nokomis project.
? The deal is structured in a way that will not dilute existing shareholders and preserve the upside of the Nokomis project