RE: RE: RE: RE: RE: equity financing John,
In my calculation of $450 million ($1.50 per share), I consider that Yara would still have to add another $642 million to build the mine (although they would save by building a 3-4 mtpy mine). This represents an investment of $1.1 billion (450 + 640). At $3 per share, Yara would need to invest $1.55 billion. This is a lot of money. This is why I believe that they may come with an offer before the end of summer. $450 million is in the same price range as recent deals ($284 million for Anglo Potash; $341 million for Athabasca Potash; $434 million for Potash One). Would the management accept $1.50 per share? I have no idea given what would likely be the SP of Allana in 2016,2017,2018 (see below). Myself, I would accept at this moment.
Cheers
Jeremy
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Here a repost of the estimation I did a few months ago of the SP once we will hit production (based on the FS study). There is a lot of upside at the current SP.
Here how I calculated the share price (all the parameters come from the FS and it is based on 1 MTPY and no railway):
First, some theory about earnings per share (EPS):
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Definition of 'Earnings Per Share - EPS'
The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
Calculated as:
EPS = (net income – preferred dividends) / weighted average number of common shares
When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.
Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.
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From the equation above:
1- Net income is also known as “Profit After Tax”. Profit After Tax is the concept used in the FS.
2- Although we do not have a dividend, the FS conceptualized the “Government Free-Carried Interest” (aka the 5% royalty) as a dividends (p.190 of the FS))
3- Average outstanding shares. (I use 4 different scenarios, ranging from 300 m shares to 450 m shares). I add 3 million shares every year for compensation (new options)
| Data below are taken from the FS (p. 222 of the PDF) |
| | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Profit After Tax | 61,310,600 | 185,104,960 | 283,890,250 | 293,149,580 | 301,127,333 | 308,447,899 |
| Government Free-Carried Interest | 3,065,530 | 9,255,248 | 14,194,512 | 14,657,479 | 15,056,367 | 15,422,395 |
| Price of potash | 456 | 465 | 475 | 484 | 494 | 504 |
| Profit After Tax (net income) minus Government Free-Carried Interest (dividend) |
| | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| | 58,245,070 | 175,849,712 | 269,695,738 | 278,492,101 | 286,070,966 | 293,025,504 |
| Number of shares (Different scenarios) (3 million options add every year) |
| | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| # shares (scenario #1) | 300,000,000 | 303,000,000 | 306,000,000 | 309,000,000 | 312,000,000 | 315,000,000 |
| # shares (scenario #2) | 350,000,000 | 353,000,000 | 356,000,000 | 359,000,000 | 362,000,000 | 365,000,000 |
| # shares (scenario #3) | 400,000,000 | 403,000,000 | 406,000,000 | 409,000,000 | 412,000,000 | 415,000,000 |
| # shares (scenario #4) | 450,000,000 | 453,000,000 | 456,000,000 | 459,000,000 | 462,000,000 | 465,000,000 |
| Earnings per shares according to the different scenarios = Profit After Tax (net income) minus Government Free-Carried Interest (dividend) / number of shares |
| | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Earning per share (scenario #1) | 0.19 | 0.58 | 0.88 | 0.90 | 0.92 | 0.93 |
| Earning per share (scenario #2) | 0.17 | 0.50 | 0.76 | 0.78 | 0.79 | 0.80 |
| Earning per share (scenario #3) | 0.15 | 0.44 | 0.66 | 0.68 | 0.69 | 0.71 |
| Earning per share (scenario #4) | 0.13 | 0.39 | 0.59 | 0.61 | 0.62 | 0.63 |
Now, if we apply the average P/E ratio in the industry (14.08) (see below for calculation (P/E ratio from March 25, 2013))
| | P/E ratio |
| AGU | 10.3 |
| POT | 16.5 |
| ICL | 13.5 |
| IPI | 16.3 |
| MOS | 13.8 |
| Average | 14.08 |
We get the following share prices (estimates may vary due to rounding):
| Share prices according to the different scenarios = Earnings per shares * P/E ratio |
| | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| Share price (scenario #1 = 300 m shares) | 2.73 | 8.17 | 12.41 | 12.69 | 12.91 | 13.10 |
| Share price (scenario #2 = 350 m shares) | 2.34 | 7.01 | 10.67 | 10.92 | 11.13 | 11.30 |
| Share price (scenario #3 = 400 m shares) | 2.05 | 6.14 | 9.35 | 9.59 | 9.78 | 9.94 |
| Share price (scenario #4 = 450 m shares) | 1.82 | 5.47 | 8.33 | 8.54 | 8.72 | 8.87 |