TSXV:AAA.P - Post by User
Post by
stocktaon Oct 18, 2011 11:51am
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Post# 19159357
Buyout price...from buyers perspective
Buyout price...from buyers perspectiveI took a look at what companies like BHP are looking at for an Internal Rate of Return on buying out AAA at this stage and I made the following assumptions:
100 M recoverable tonnes of potash (assuming revised 43-101 gets us to that point)
Total cost per tonne of production including fixed costs = $200
Average selling price of produced potash per tonne = $500
Mine Life = 50 years
Total Annual Production in Tonnes = 2 M
Net Annual Cash Flow = $600M
Cost to build plant = $1.5B (I know this is high but wanted to be conservative)
Cost to buy out AAA shares at $10 per share = $1.96B
Purchasers Cost of Capital = 15% (probably a bit high but again conservative)
Total NPV of Buyout of AAA at $10 per share = $1.3B
Total IRR of Investment to Purchaser at $10 per share = 26%
Geez, if I was faced with an investment decision to yield 26%, I would have to have rocks in my head to turn it down.