How much is Chariot worth to a major mining companNews Release (Sept 9th):
Chariot Resources Limited (TSX: CHD) announced that the Environmental and Social Impact Assessment (ESIA) for the Mina Justa Project has been essentially completed. Chariot President and CEO Ulli Rath and a delegation from Marcobre SAC, Chariot's 70% owned subsidiary are planning to meet senior officials of Peru's Ministry of Energy and Mines in the very near future to review the highlights of the ESIA before its is formally submitted to the government. Thereafter the ESIA will be subject to the new regulatory review process including public hearings.
"The completion and submission of the ESIA is another element in our strategy to add value to Mina Justa," said Ulli Rath. "We have said for some time that Chariot would undertake initiatives to enhance Mina Justa, and that we do not want the Project to slow down as a result of the process to sell the Company which is now well underway." said Ulli Rath, President and CEO.
"The submission of the ESIA and the associated commencement of the permitting process will move the Project closer to shovel-ready status."
Reuters News:
AREQUIPA,Peru (Reuters) - Canadian junior miner Chariot Resources CHD.TO is looking to sell itself as the global crisis has left it without options to finance its project in Peru, the firm said on Tuesday.Chief Executive Ulrich Rath said the company's Mina Justa copper project in the Peruvian region of Ica needed investment of around $744 million. "The decision has been made that we want to sell the company Chariot Resources ... because at this moment the global situation makes it difficult for a junior company to obtain financing," Rath told the 29th biannual Perumin mining conference.
"Without the possibility of financing, the best alternative is to sell the company."
Mina Justa has probable reserves of 163.4 million tonnes with a copper grade of 0.8 percent and a mine life of 12 years, according to the company.
Rath said Mina Justa could produce about 120,000 tonnes of fine copper a year.
"According to the program, construction of the project could start in the second half of next year, to start producing in 2012," he said.
He said production costs would be $0.90 per pound of copper, one of the lowest rates in the world.
Peru is one of the world's top copper producers and mining is the traditional engine of its economy.
News Release (Oct 1st):
The bulk of the funds will be used for (i) supporting approval of the ESIA and the start of permitting; (ii) the acquisition of important surface rights; (iii) upgrading the concentrator to feasibility level; and (iv) broadening community relations initiatives. The budget also contains a provision for the start of limited construction of critical early infrastructure in 2010.
So the question of the hour is how much is Chariot worth to a potential major mining company looking to expand its portfolio?
In the both NR’s, Rath indicates that they’re trying to “add value”, “not slow down the project”, “acquisition of important surface rights”, “upgrading the concentrator to feasibility level”, and “move the Project closer to shovel-ready status.” of the Mina Justa project. What that tells me is that they are trying to increase the value of the company’s financial worth. Just as a person selling a house would paint the walls inside and out, cut the grass, reseal the windows with caulking, fix squeaky doors, and fix any water spots or leaks in the ceilings; all of this is done to increase the resale value of a home that is about to go on the real estate market for sale. This is also why Chariot is doing all these things to make the Mina Justa project look more viable to potential bidders of the company.
The second part of the Reuters news indicates that Rath needs to sell the project in Peru because “the global crisis has left it without options”, and that the company “needed an investment of around $744 million” to operate.
This brings up a speculative question:
How much is Chariot worth to a major mining company?
Here is a possible answer (simplified)
1.) They can take the current share price and multiply that by 1.8 to 2.5 times the current price to get an approximate figure of how much they may want to purchase the company for.
2.) Example:
a.) Current Share Price (times) 1.8 = Possible minimum share price to purchase Chariot at.
b.) Current Share Price (times) 2.5 = Possible maximum share price to purchase Chariot at.
3.) By establishing both a minimum and maximum share price, this allows potential bidders to have a better ball park of how much they would want to make an offer for purchasing Chariot. They can further refine their bid by examining the Mina Justa project in-depth and this will give them an idea of how feasible this project is to them.
4.) But the best way for them to figure out what the company may be worth initially, is to not just take today’s current share price, but to take the average share price from the past 6 months or a year to get a better idea of what they may offer to buy Chariot at.
Just some thoughts…
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