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North Shore Uranium Ltd NSU


Primary Symbol: V.NSU

North Shore Uranium Ltd. is a Canada-based company, which is engaged in the exploration for uranium deposits at the eastern margin of Saskatchewan’s Athabasca Basin. The Company conducts its exploration programs on its two properties, the Falcon Property and the West Bear Property. The Falcon Property is located approximately 35-kilometer (km) east of the former Key Lake Mine and the active Key Lake uranium mill which processes ore from the McCarthur River Mine. The West Bear property consists of five mineral claims totaling 4,511 hectares located at the eastern edge of the Athabasca Basin which hosts two producing uranium mines.


TSXV:NSU - Post by User

Post by bendystockon Apr 26, 2016 3:50pm
280 Views
Post# 24812014

Nevsun Valuation Attempt

Nevsun Valuation Attempt
I posted the following on the RMC board, here it is again.
 
Great point on no response from Lundin as of yet, I don't expect much from them or anyone else until after May 3 - more on that in another post. 
 
After trying to learn  more about Nevsun over the past 24hrs I wanted to make an attempt at valuing them post transaction, I will call them New Nevsun. Here is what I came up with using some assumptions I don't think are way out of line. Everything is in CDN at an exchange of 1.27 to USD.
 
New Nevsun Valuation
 
$939 Million - Old Nevsun as valued by the market (1)
$292.1 Million - Share of Timok as valued by Lundin (2)
$572.5 Million - RMC Valuation as valued by Old Nevsun (3)
 
$1,803.6 Million - New Nevsun Valuation
 
I estimate this to be about $6.10 per share for New Nevsun 295.5 Million shares outstanding after the proposed transactions and what I think amounts to a share buyback plan. (4) - this should read $6.07 and 297.2 (sorry cut and paste error that I was not able to correct on the RMC board)
 
(1) $939 Million was calculated by the market price of NSU being $4.7 per share before the transaction was announced with 199.8 Million shares outstanding. Market price for NSU has ranged from $3.27 - $5.25 over the last year, most analysts think it is a good buy up to $5 or higher before the deal was announced so I will go with the market price.
 
(2) $292.1 Million was calculated using the Lundin offer to Freeport less $32.5 million that I deemed to be cost of doing business/drilling expense so $230 USD or $292 CDN. I believe this was a good deal for Lundin so think it may be a bit undervalued but value is what someone is willing to pay and I think Lundin seem like a smart company so I will go with their valuation of what they were going to get.
 
(3) $572.5 Million was calculated using Nevsun's $9.4 per share valuation of RMC and 60.9 million shares outstanding, 12.2 million new issued to NSU and 48 million outstanding before the NSU announcment.  If any investor is going to buy 20% of a company at a certain price I assume that is the value of the other 80% of the company as well. I have no reason to doubt Nevsun's valuation based on other research studies I have seen on RMC's proposed value as well as what the market has thought of them over the last couple months. 
 
(4) Total equals $1.8 billion dollar company simple math. The interesting assumption is the number of shares outstanding of New Nevsun. If you simply take current outstanding of 199 Million and then double RMC's outstanding of 60.9 (121.8) you get about 321.6 Million shares outstanding for New Nevsun, this would mean a per share price of about $1.8 Billion / 321.6 Million shares - $5.60 per share for New Nevsun.
 
The confusion is that when NSU purchases all of RMC's shares for two NSU shares each they are buying 12.2 million shares of RMC that they already own through the purchase agreement. My take on this is that it will amount to New Nevsun buying back 24.4 million of its own shares at a price of $4.7 per share leaving about 297.2 million shares of New Nevsun outstanding. With a market cap of $1.8 Billion / 297.2 million shares I estimate $6.07 per share for New Nevsun.
 
Oddly my estimates of between $5.60 and $6.07 match closely with the research notes from Dundee ($6.25) and TD ($5.50)
 
My opinion and I think it is accurate is that as of May 3 RMC owns 100% of the upper zone and 66% of the lower zone and NSU is the biggest shareholder of RMC at 20%, other than that NSU just needs to cross its fingers that their offer for purchase of RMC gets accepted and or they do not get out bid before a June ish closing.
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