RE: NWI/NI SPs Going Forward - Repost
Posted late last night....
Like weakerthans, I have been reading more than posting, and like weakerthans I got in for the play on Uranium. FWIW, I did not plan to sell either stock post spin-off, and at this time I'm still of the same mind. The main reason being my research has me investing in uranium nickel and zinc.
As I stated, I got into NWI mainly for the Uranium. However, it has become evident to me that most here are seeing the real value for this play being the nickel, and I agree the nickel prospects appear to be much less speculative. The sense I'm getting is that there will be definite selling pressure on NWI tomorrow as it appears to me many are holding till then to get their NI shares. Because I have not got a proper evaluation for each company, mathematically, based on today's closing, they are worth about 84 cents each (one NWI share became 1.75 shares, so 1.47/1.75 = 0.84). However, I doubt that NWI has anywhere near the intrinsic value of NI (NWI being highly speculative at this point), so I fully expect the market to realize this and price both accordingly. Based on this and my feeling there will be a lot of NWI sellers tomorrow, I think the opening will be no better than 0.50 - 0.60 for NWI and a tentative 0.80 - 0.90 for NI. But, I also expect that NI will slowly pick up steam as the day progresses and into the next week or so. After that it's up to the company to show investors NI is worthwhile.
I realize that the comapny has put $2 values on each stock, but frankly, I put no credence in that - I've heard too many stories too many times. I also realize that one reason for a spin-off of this nature is to realize undervalued assets of a corporation and a lot here (including me) are counting on that. However, I think this will be mitigated somewhat by the speculation going on here and the fact many are just looking for the nickel play.
Finally, re valuation, I've see several estimations here and they typically multiply reserves by the nickel spot price. I must confess I do not know the operating costing of nickel mines (I should, I'm from Sudbury), but if I can use gold miners as an example, I've also seen valuations based on ounces in the ground. For example, if there is a reserve of a million ounces and the price of gold is $600, then valuation is $600million, right? Wrong. A typical gold miner spends $300/ounce to extract and process the ore. I realize that this $300 figure will vary wildly between deep shaft and open pit mining and may be outdated due to new technologies, but you get my drift - this leaves a value of $300million. Also it will cost anywhere from $50million to $1billion in capital expenditures to build the mining infrastructure. I have a long way to go before I know how to evlaute a junior mining play, but I know one thing for sure - it sure isn't as simplistic as multiplying ore in the gound by spot prices.
If you guys are like me, you are probaly not in this for an operational mine. I'm in it as a "best bet" speculative play with a short time frame hoping for the best case scenario being a buy out by some major. This being the case, it's all about timing. In fact, watching the action on this stock, my timing may be already off. Like many of you, I'm betting not and betting that the underlying value here is yet to be realized, but I strongly doubt that realization will be tomorrow.
j