RE:RE:RE:RE:Some NumbersDon't get me wrong - I would also love to see EDV develop Houndé through to production (180,000oz per annum @ AISC $800), and gold prices averaging > $1,300 over the next decade, but we can't count on this. $315m of upfront capital would be required over the course of the 21 months preceding first gold, not forgetting the $117m of annual loan repayments scheduled for 2016,17,18. The fact is that EDV cannot, and should not even consider developing Houndé given their current financial situation.
An equity issue of that size would represent 115% equity dilution, for a 43% increase to production, and say an extra 85% in EBIT (around $81m in EBIT @ $1,250 gold). It just doesn't make financial sense at current share price (it would result in LOWER EPS), at share prices above CAD90cents the numbers begin to add-up.
Maybe they can find a more creative way of financing Houndé development. A gold-streaming deal IMO could perhaps be ideal for EDV, as the debt repayments would be non-cash, and the financier takes on some of the gold price risk. I've not done the math, but sacrificing say 15% of annual production (27koz per annum fixed) from Houndé over 8 years would result in total gold delivery of 216koz, valued at $270m at $1,250 gold. Would someone not be willing to offer EDV $200m in capital against such a stream of future gold production? Of course, there is a downside to this - the remaining 153koz of Houndé production (net to EDV) would have to be reported at a higher AISC ($940/oz?) / lower margin (cost base for production of 180koz vs. cash revenues on 153koz). The project would still have a (albeit smaller) net positive effect on EDV's overall AISC, shareholders would benefit from reduced dilution/financing risk, and increased earnings and cashflow per share (when compared to excessively dilutive equity financing). At the very least I think that this option should be considered as a possible part of the financing 'mix'. Just thinking aloud again...comments welcome!