RE:RE:$8 funninessGigantapithic wrote: The random appearance of an $8.00 figure is neither realistic nor unrealistic; it simply comes down to two metrics pounds and price paid for those pounds.
Pounds are a static figure, it'll be whatever is proven and very quantifiable, it's either there or it isn't there, pretty simple. Price paid for those pounds is dynamic and there's a ton of variables that can be viewed differently by different parties. Some economic, some for stable fuel supplies, some for both. Some will pay less for a certain return, some more...
There's been plenty of tables provided with different pounds and prices over the months. Let’s ignore 105 million lbs as that's already out of the question. Starting at 150 and onwards
420 million shares FD (guess), $8.00 offer, $3.36 billion, 150 million pounds, $22.40 per pound
420 million shares FD (guess), $8.00 offer, $3.36 billion, 175 million pounds, $19.20 per pound
420 million shares FD (guess), $8.00 offer, $3.36 billion, 200 million pounds, $16.80 per pound
420 million shares FD (guess), $8.00 offer, $3.36 billion, 225 million pounds, $14.93 per pound
420 million shares FD (guess), $8.00 offer, $3.36 billion, 250 million pounds, $13.44 per pound
It's that simple... What's not simple is figuring out the cost per pound. CCO and RIO made their bids on HAT taking into account what they believed the costs were per pound to extract and mill the uranium and then make a return on their investment. In the end it came down to approximately $10.00 per pound. So if FCU's deposit is substantially cheaper to mine and mill then the acquirer can afford to pay a higher $ per pound, if it's not cheaper they can't afford to pay more. Things that will come into play are the U price, current (don't for a second think a buyer will ignore that today's prices SUCK and use it to their advantage), future prices, the buyer's needs (supply, reserves, profit, etc), the buyers expertise, whether they can partner with someone, etc.
Right now we’ve got 105 million pounds and using a metric of $10 per pound because there’s nothing else to use (no PEA) that works out to $1.05 billion and using 420 million shares works out to $2.50 per pound. Using the $10 metric, every million pounds discovered from here on out should warrant a $0.025 increase in share price. So, if we’ve found 20 million more pounds, that’s $0.48 cents, so $2.98. I think given how the winter program went it’s reasonable to assume we’re at 125 million pounds and using the only metric available (comparable sales) the share price at takeover should be $3.00. Start looking at the price paid per pound and adjust up or down and we have a profound effect on share price. So, back to the original comment, $8.00 is neither realistic nor unrealistic; it just requires a set of circumstances that need to be proven. In 8-10 weeks we should see evidence of how many pounds we have (metric 1) and the cost to extract those pounds (metric 2) which will help guide the final valuation.
I think by the time we get to August we’ll be able to say we’ve got between 150 – 175 million pounds. I don’t think (anecdotally) we’ll be able to support $19.20 - $22.40 per pound ($8.00 share price), I think they’d (buyers) go for the historic $10.00 per pound and maybe, BIG MAYBE a PEA could convince a suitor to go to $15.00 per pound which would mean $5.36 – $6.25 per share. But, today’s market also makes me think we could get the historic average, so, maybe they pay $10.00 per pound and we see $3.57 - $4.17 share price. A low ball scenario of $8.00 would equate to $2.86 - $3.33 assuming $1.2 billion - $1.4 billion makes it too pricey for multiple offers.
Until that time, everything is just noise… I spoke to someone from Rio Tinto the other week. He’s their chief exploration guy handling Roughrider and Russell lake, said FCU was an amazing discovery and to enjoy the ride. . . He didn’t get much more details but emphasized the importance of the PEA.
I completely agree. I think FCU will be able to prove up 200 million pounds at most, and that they will get 10 dollars / pound max (given the fact the major has to construct a mine as well, and possibly even a mill). I've stated several times a PEA is important, and I'm glad to hear Rio Tinto agrees with me :-).