RE: RE: RE: Thanks are in order.. Part of me thinks they didn't spend much time vetting this deal, and I mean that without any derision. I think this is what would have stood out for them:
- Rio Tinto, a world class mining company, is the operator
- in two - three years time they plan to process enough ore to earn SND ~$13 million and SSL ~$37 million
I think Nolan looked at that from SND's perspective and said, OK, this deal has a 96% IRR, I get back my entire investment in 3 years plus some juice on top, and then I get a free option that could earn us $4 million or more down the road. World class operator so little execution risk. Same kinda thing for SSL.
They are predicting the orebody may be in production 10 years from now. What they are really saying is, we have no idea when the ore body will be in production. They absolutely cannot predict, as omnipotent as they may seem, what is happening ten years from now.
Nolan knows what we know, that this is a huge, huge, huge bet for Rio, and the government of Mongolia, and the current mine plan includes enough reserves that we are getting $13 million back in 3 years time. As long as that mine plan doesn't change, this was a good little tuck in stream.
Can you imagine doing a deal in Canada for a $20 million investment and getting back $16 million for > 50 years with a top tier mining company? This is essentially what Nolan has done, except with a $5 million bet (a lot smaller), in Mongolia. These deals are rare, and the more you drill down into the details, it makes sense to jump on these opportunities when they present themselves.
The only thing I DON'T understand is why he didn't just pay in cash. We are getting back $6 million from TER, why did he dilute us by 3.5% if we could avoid it? My only conclusion is that we have another stream we are about to enter into, or we are planning to bankroll NDX 100%, which I know some of you may not be happy with, but I am OK with. If NDX is run properly it looks like it could earn us $15 - $20 million a year at spot met coal prices. One year of operations like that and we'd sell the asset off, keep a stream, and this company would be near $1.50 a share. Ok I'm rambling, farewell.