Share price and takeover amountJust some things to keep in mind when trying to calculate a take over amount or share price at take over by a major.
Two big things that the bidding/buying major will have to consider and will impact the final price are:
1) There are at least two NSR's totalling 3% on the property. May not seem like a lot, but they will have to be either bought out or taken into consideration when making a bid/offer and will affect the final price either way. 3% on this deposit is pretty significant because of it's size and quality.
Osisko holds 1% NSR Following the divestiture, Osisko holds a 1% net smelter return royalty on all sulfide ores of lead and zinc (and any copper, silver or gold recovered from the concentrate from such ores) mined from Arizona's world-class Hermosa Project located in Santa Cruz County, Arizona, purchased for $10 million in April 2016. EMX holds 2% NSR Commercial Terms Overview. Pursuant to the Agreement, AZ Minerals can earn a 100% interest in the Project by making cash payments totaling $85,000 (all amounts are USD). Upon exercise of the option EMX will retain a 2% NSR royalty on the Project and receive annual advanced royalty (“AAR”)
payments of $5,000 commencing on the first anniversary of the exercise of the option. The EMX royalty is not capped and not subject to buy-down.
2) Majors will not pay a premium or the same price (as the patented land) for the unproven unpatateted land. We all know that there's amazing stuff below, but how much? You can see the banks will only raise their projections on share price for proven objective results. Management of majors are the same. Yes, a $10-12+ price for a fully explored unpatented land would be a no brainer, and AZ could command that price in say 3 years when permits for the Federal land are issued and drilling is done and the full scale of the resource is known, but that is not the case. AZ's management hold a good position, but a lot of that money was parlayed from the Rosemont Augusta Hudbay buy out from 2014 and they probably wouldn't mind to either see the realized gains and/or advance and maintain strong positions in the other companies held within The Augusta Group of Companies as the mining sector really starts to heat up and make more money with those companies during this bull metals run. Not selling Taylor/Hermosa sooner may mean missing out on advancing and selling those projects in a favourable market and may have to wait until the next commodity upcycle in 8-10 years to sell.
Regardless, the deposit is a monster and will fetch a good price. Management will have to decide if it's worth it to sell now and use those funds to make more in this commodity supercycle or prove out the property for a higher buyout in the next couple years. The typical, 'You can't have your cake and eat it too' scenario, but this time for management, it doesn't matter whether they 'eat or 'have.' Everyone will make a lot of money.