RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Cynthia’s post on LinkedIn todayHey @fatlas
I am not rejecting your number although I do think it may be a little high. I am saying I do not see anything close to it right now, however here is a scenario where I can see it in a few years. I think that in any negotiation understanding the wants and needs of the other people involved is critical and not doing so is not doing your due diligence. Especially when there is so much information available online.
I wish I was more like @Goldbelt and had some more Technical Analysis skills and could trade that way, but I don't. I just like to read and examine previous business deals and use that to try to entertain possibilities of what could happen in this case.
The Players
Laurion Mineral Exploration
Orion Mine Finance (Private Equity)
Equinox Gold/??? (Mid-tier producer/Large-tier producer)
Assumptions
In order to extract full value for the Ishkoday, it will need to be near production ready. This means a Mineral Resource estimate and Feasibility Analysis. I make no requirement that they be released publicly. I am also assuming at least 150,000 more meters of drilling will be required to validate the resources on the Ishkoday at an average drilling cost of $200/meter ($30M) This is based on reading the 43-101s of the Kinross Gold Bear Project, Goldshore's the Moss Lake Project, Marathon's Valentine Project and Equinox's Greenstone Project.
I have chosen Orion Mine Finance and Equinox Gold as potential acquirors based on their existing work in the region and the enhanced value that an acquisition of the Ishkoday brings to both of them (more below).
Background
Companies buy other companies to make money, that is obvious. However different companies have different expectations of profit and will value an acquisition differently. Typicaly, a private equity company would look for a higher rate of return over a shorter period than a gold producer, optimally with a continuing revenue stream.
In January 2021 Orion Mine Finance (OMF) paid 285 million USD for a 50% interest in the Greenstone Goldmine. The other 50% of the Greenstone is owned by Equinox Gold from their takeover of Premier Gold mines. In April 2021(three months later) OMF sold a 10% stake back to Equinox for 60 million (cash and consideration). A 110% increase on the orginal valuation.
That is the power of private equity. It is an accelerator that comes from a large cash infusion, but the expectation of rate of return is very high.
The Greenstone Goldmine is an open pit mine, 50 km or so from the Ishkoday. In 2021 Equinox began construction on the mine. From the time of the acquisition in 2021 when Equinox called it "production ready" they have invested 1.3 billion in construction and other costs. The mine is scheduled to have it's first gold pour in 2024.
Equinox Gold is a mid-tier producer with 7 mines in production. The Greenstone is going to be one of their biggest and is critical to their ongoing success. The thing about Equinox is they lose money. Their cost of production is really high with an average All In Sustaining Cost (AISC) of over $1500/ounce. Ouch! This is primarily due to the types of deposits they mine (low grade, open pit) and that two of their mines are in Brazil, which has amongst the highest inflation in the world. Their documentation has estimated the AISC at the Greenstone at under $800/ounce which would be great for them.
It's this reason why I believe the Ishkoday has to be seen by Equinox as acquisition target. If there is any synergy to be had, it could only have a positive effect on lowering their AISC and increasing the lifespan of the Greenstone mine. Equinox is focused on growth and the Ishkoday (with validated resources) is an easy path to growth. That said, Equinox cannot afford the Ishkoday right now. They don't have the cash and they have financed the construction of the Greenstone on stock equity so a stock deal I think is out as well.
I could see a scenario where Laurion sells a percentage of the Ishkoday to Orion Mine Finance. For private equity to take a position in the Ishkoday, they will want a path to good returns in the short order. It is possible that this year's 5000 meter drilling program targeted as it is on areas of high mineralization probability and the results of exhaustive fieldwork is designed to support that investment position. I don't think OMF are going to pay a premium over the stock price right now, because outside of private equity Laurion's options are issuing warrants. I think that Laurion may be hesitant in terms of what percentage they are willing to sell and they would be cautious in maintaning control, however an investment of 10s of millions would allow them to accelerate their drilling program, validate the resources and put them in a position of production-ready in a few years.
In that time Equinox is hopefully in a better position with the Greenstone online and producing and ready to expand their investment in the area.
At that point I think you can claculate you price per ounce in the margins you have suggested, with the only point that Laurion shareholders will own a less than 100% stake in it.