RE:RE:NSU downsideExcellent point and you're absolutely correct, but since the point of the exercise was to take a defensive posture, I wouldn't use the $800 million, as it would sound way too bullish. The point of the exercise was to try to arrive at a valuation for the Timok project.
What we have on the table, the "real market" was the offer of Lundin for Freeport's portion and optionabilities. That being $262 million US dollars and them being able to obtain 75% of the UpperZone.
Excerpt from an article
https://globenewswire.com/news-release/2016/03/04/816838/0/en/LUNDIN-MINING-ANNOUNCES-AGREEMENT-TO-ACQUIRE-INTEREST-IN-HIGH-GRADE-COPPER-GOLD-PROJECT-FROM-FREEPORT.html
Subject to the ROFO, upon the completion of the transaction, Lundin’s ownership interest in the Timok project will be as follows:
- 55% of the Upper Zone (Reservoir 45%), and
- 15.4% of the Lower Zone (Freeport 39.6%, Reservoir 45%)
Following the delivery of the feasibility study upon which Freeport’s interest in the project will increase to 75%, Lundin’s ownership interest in the Timok project will be as follows:
- 75% of the Upper Zone (Reservoir 25%), and
- 21% of the Lower Zone (Freeport 54%, Reservoir 25%)
Purchase Price
Total consideration of up to US$262.5 million is payable as follows:
- US$135 million payable to Freeport upon closing of the transaction
- Up to a maximum of US$20 million to be spent by Lundin in connection with agreed exploration and study work on the Lower Zone
- US$45 million payable to Freeport upon the earliest to occur of (i) a build decision on the Upper Zone, and (ii) access to any ore body for direct ship ore
- US$50 million upon the achievement of commercial production
- Up to US$12.5 million in recoupment of project expenditures
The issue is what would be the market value of the new NSU without the Bisha mine, in a worst case scenario.
Cash in the bank $260 million + the Timok project divided by the new Nevsun 300 million shares
Perhaps somebody with more expertise can take a run in calculating the Timok project using the real market price being the Lundin's offer.
Conservatively and by extrapolating the 75% of Lundin, we would arrive at an approximate value for the Timok project in the range of $400 to $600 million
In my previous post I had indicated the new NSU worst case scenario to be in the range of $2.25 to $2.50 US dollars and I think that the numbers of the $260 million US in cash + the value of the Timoki project, utilizing Lundin's offer - representing real market value- my numbers are basically in the ball park that I had stated previously.
I'm using numbers that are very conservative and pessimistic in nature.
Point being the new NSU is now trading at roughly .50 to .75 cents expressed in US dollars
To my way of thinking, the current stock price of the new NSU is undervalued, with the Bisha mine being valued at .50 to .75 per share which includes the value of NSU's management and operating team's expertise in building and operating the mine, which is subjective but critical in assessing the Timok project and the current dividend being paid by NSU, which I would expect to be maintained for a short while at least and then reduced to redeploy cash more efficiently.
Bottom line, is the new NSU is undevalued, trading near or below its worst case scenario at current prices
Market Re-Adjustment
NSU was trading at around $3.30 US prior to the proposed merger with $460 million in cash and 200 million shares outstanding.
Thus the market value for the non-cash portion was roughly $200 million or $1.00 per share
If we add the .80 cents cash value and say $2.00 per share for Timok ($400 to $600 million) being roughly $1.30 to $2.00 per share US, the new NSU should be trading at around $3.10 to $3.80 US per share
If we add the value of managment expertise and operating team of the old NSU to the Timok project, it should add conservatively another .25 to .50 per share US $.
Thus the New NSU ought to be trading at around the $.3.35 to $ 4.30 US per share
Once the Timok reserves are confirmed and the project advanced, funded by current NSU cash flow the worst case scenario for the new NSU would be at minimum $3.00 and the value of NSU would be much higher than the $3.35 to$4.30 US $. Probably another dollar or two.
If we add additional cash growth, (re Gold sale) zinc floatation plant in full operation, and higher reserves in both projects the new NSU, would further increase in value per share.
Limited downside tremendous upside potential
All Aboard the new NSU Bull Express