RE:Edison Evaluation in 2018 Don't forget the "time to cashflow" discount to Net Present Value from 2018 has been reduced significantly by elapse of six years of compounding discount interest, and the rates used in the mining business are several points above prevailing long term rates. Another significant valuation bump. It has been strange to me that the ETG Corporate Presentations updated over the past few years have continued to use NPV calculations using old (lower) metals prices AND outdated discounting to cashflow calculations. They continue to seriously understate the fair value of the OT JV interests to ETG.
Of course, why would management be motivated to up the pricing of their options, or care much about the stock price when it gives them more flexibility and an apparent larger lift to fair valuation? They know warrants and option exercises would continue bringing in sufficient cash to treasury to keep the lights on and their compensation running without having to go to market with new shares or further dilute the share float. No underwriters with paper pumping ETG's tires, no promotion to speak of, no wonder the trading share price is so potentially far below real value. It's an unusual situation.
There is a second potential lift in OTLLC immediately pivoting on the timing of Lift 2 (advancing it) and expanding production capacity - ETG is more valuable in their hands than any other party. Our only practical buyers (and I fully believe the Mongolians would pull out the stops to prevent any third party from controlling ETG) have a unique position to enhance the value of ETG's interests.
Pondering the HCU manouvre by SSL, one aspect that may have been in play is the original covenant by SSL to vote with ETG management was dependent, in the event of a change of control of ETG, in ETG procuring a deed of adherence by any new controlling entity to the royalty stream agreement. It may well be that the Mongolians and/or Rio said they would never give such an assurance, and that the royalty stream is in jeopardy of some punitive downstream Mongolian taxation as SSL has no special status with respect to Mongolian mining taxes and royalties. I suppose one protection for SSL might be that HCU as a condition of agreeing to a price to sell their 25% equity might also require a buy-back of the SSL ETG royalty streams, but updated to reflect a much higher value given the leap in metals prices. As I recall the streams were half repurchased/refunded by ETG already?
So very curious whether we are getting aroused by Friday's AGM cancellation for good reason (transaction coming) or will find out nothing can been settled and agreed to by all the required parties ... yet again.
If the stock opens for trading Monday with no halt or announcement will be interesting to see if the market has been stimulated by the possibilities. Surely there is lots of upside to the trading price with still lots of upper room towards a fair valuation in a buyout scenario?
cg