RE:RE:RE:Junior attempts a build - Argonaut Gold edition - A RevisitOne can argue that the present values of construction costs utilized to generate the NPV are too conservatie and will be larger, however the price of the metal concentrate payables will also increase and I am betting at a higher clip than construction costs. Alleviating the construction risks and costs of operating obviously is one reason that RIO is slow walking this until they have more confidence that the Yukon & Canada are fully on board to the maximum extent possible (roads, grid, etc.) prior to formal negotiations. Of course, as the risk goes down, this is more favourable to both parties and diminishes one of the bargaining chips of the suitor.
But, putting aside discussions regarding how to arrive at the NPV, once the NPV is arrived at I do strongly believe that a junior developer is entitled to much more than 20% of each dollar of NPV.
A mine takes say 3 years to build? WRN has built the company (more or less) from scratch with a zero ounce resource and nothing but a hope and a prayer that an economic resource will ever be found to one of the largest gold deposits on planet earth over a course of almost two decades. How is that worth only 20% of the pie? RIO most certainly would not spend the time or money to accomplish what WRN has and we all know this.
Why don't the majors create their own "Explore Co" companies to perform the same job that the juinors do? It is because that is not their wheelhouse, they are miners, not explorers/developers.
I view the industry as (ideally) being a symbiotic relationship between the juniors and the seniors. The juniors need the $$ from the majors to legitimitze their operations and aspirations of being acquired via M&A. The majors need the juniors, else their pipeline dries up and they go bankrupt. Of course both parties want to maximize the return for their respective shareholders in any negotiations, anything less would be unthinkable. And yes, I know there are many poor managers out there who sell their shareholders out for a pittance. If our new CEO is a go-getter and will stick up for us shareholders (that is the general assumption, at least in comparison to Paul, no?) then we are looking at much more than 20%. I don't have a crystal ball, but I would say we end up closer to 50% than 20%.