Valuations in Canada get quite OUT of SYNQ.MPVD is fairly hugely undervalued Vis a Vis Stornoway. The gross numbers are simple, and its easy to show.
MPVD is $400M Debt Can. plus or minus $10M of Working Capital, and th Equity valued at
$800M . I use production cost from the FS at $210M Can for the JV, our share being $105 Can annually. 2ndQ production I bump a little bit rounded to 800K Carats and I bump the price a bit, as Stornaway achieved close to $100US per Carat last July sale. That was a decent increase for them over previous sales, we should give the increase to MPVD JV too.
So you have a Q forward forecasted run rate revenues of $80M US. Lets knock down the exchange rate a bit to account for my bump in price US and the little uptick in production to 800K Carats. Can Revenues become $80M US times 1.2 or $96M. Op ex is $105M per year for MPVD, our 49% share.
EBITDA is easily close to $300M per year Can. Lets use $250 Can EBITDA just to be conservative.
EV/EBITDA becomes $1200M Can/$250M or 4.8. At $300M Can we have an EV/EBITDA of about exactly 4.
Clearly, the bankers ARE going to get their debt interest and principal back in 2017 and 2018 under these current conditions AND MPVD will suffer No further shareholder dilution.
Unless some whores have their way with KDI/MPVD arrangement. They can probably even start a divie or buyback in 2018 sometime.
Stowaway, not so good. Valuation is much much higher. Market Cap is $690M. Can.
Working Capital is positive at $72M.
Long Term debt. is $127M. Convertible debentures are $93M...........Plus the Deferred Revenue Agreement for the STREAM DEAL. I was thinking about how to value this as a liability. Stowaway shows it as a liability on the balance sheet. They also show a deduction from Operating Cash Flow in the March Q of about 6M or so for the amortization of the deferred revenue. So, I think it's ok. then to think of the STREAM deal as DEBT with about a 10% annual interest rate attached to it until it is amortized over 10 years.
Stowaway EBITDA is then about $20M for the March Q, annualized then is $80M. That is about right on operating costs for Stowaway Vs. the MPVD JV. They are processing about 6,150 tons per day, a lower grade, compared to our JV 8,618 tons per day. Our grade being now 2.10 per ton. vs Stowaway at ??? 1.6. We were $95US per carat and their last sale was almost $100US per carat.
Stowaway EV is $1128M Can, with EBITDA about $80M. IMO Stowaway will be able to pay its debts and survive in the current environment, but I would not touch the equity at these levels and would only consider the convert debt to be investible.
I had the buyout of DD at about 5.5 to 6 times EV/EBITDA debending on how you count, so figure with the longer life at MPVD we could or should be worth a 6 multiple going forward.
IF we get a deal. Or perhaps with no deal.
I am holding my shares now for better financial news going forward. IMO we have hit the low for this cycle.