Katanga Mining Ltd Ord KATFF

ERG Metalkol Mine vs KAT KCC

[Sogosohubidu201]

https://www.bloomberg.com/news/articles/2019-07-18/eurasian-resources-is-said-to-weigh-sale-of-congo-mining-assets

https://www.cnmn.com.cn/ShowNews1.aspx?id=412687

Two recent news above, one in English and the other in Chinese (google translation if needed), regarding the potential sale or not sale of Metalkol in DRC by ERG to potential Chinese buyers such as China Nonferrous Metal Mining Co.

What is interesting to us KAT shareholders regarding how to value KAT is that ERG asks for $7 - $8 billions USD while the potential Chinese buyers may want to use $3 - $4 billions USD to value ERG Metalkol assets.

To bring KAT KCC to the same page, I will use Goldman NPV estimates for both ERG Metalkol and KAT KCC as follow:

ERG Metalkol mine in DRC: NPV = $4.884 billions USD including sunk costs
KAT KCC mine in DRC: NPV = $17.184 billions USD including sunk costs

So ERG Metalkol mine is valued at $3.5 - $7.5 billions USD including sunk costs, or 72%-154% estimate net present value (NPV) for both seller and buyers, the gap is so big that a oil tank can sail through, so not deal likely.

At the same valuation, KAT KCC may be valued at (72%-154%) NPV = $17.184 billions x (72%-154%) = $12.37 - $26,46 billions USD. Since KAT owns 75% KCC and KAT has 1.91 billion shares, the share price may be may be valued at: 75% x ($12.37-$26.46 billions USD) divided by 1.91 billion shares = $4.86 - $10.39 USD per share = $6.4 - $13.7 Canadian dollars per share.