Mercator Minerals Ltd MLKKF

RE: Silver Wheaton

[Theodis]

Just some fun with net present value.  Let's assume that 600k oz per year except year 1 at 300k ozs.  I don't think ML would be getting $20, that's for 99.9% refined silver, no?  Then you can play with different discount rates and the ML price assumes it will average that price for 20 years.  Wheaton takes the risk and potentially the reward depending on where silver goes and how long it stays there.  I think it is safe to assume that it will never go below the $3.90 set price however.  If anyone remembers the price ML used for their projections, let me know and I will plug it in.

Years	Rate	Price	Market	Deal	Diff
20	8	17	$     95	$     61	$     34
20	8	20	$   112	$     61	$     51
20	8	25	$   140	$     61	$     79
20	10	17	$     82	$     57	$     25
20	10	20	$     97	$     57	$     40
20	10	25	$   121	$     57	$     64
20	15	17	$     59	$     50	$       9
20	15	20	$     70	$     50	$     20
20	15	25	$     87	$     50	$     37

So it makes a big difference what discount rate you put on the money and where the 20 year average price will be.  If they use it to pay off  a loan at 15% it looks like a pretty good deal.  But with the projected cashflow from the production increase, why bother?  They can wipe out the debt pdq from operating cash.  I think it has more to do with how they prefer to operate.  Same as the deal for the roasting.  Lock in with the industry leaders. 

Gotta love it.