North Shore Uranium Ltd NSU

Interesting comments @ Seeking Alpha re: Lundin's Discipline

[SignorAnderson]

Mr. Anderson 007,

 

I wrote an article about Nevsun earlier this year where I came to the same valuation as Lundin offered.

 

If you dig into the mine plan for Timok you will see that outside of a few, upfront, high-grade years of mining, the deposit is not extraordinary. Whether further exploration unearths something special remains to be seen.

14 Sep 2018, 09:48 AMReply0Like

 

Mr. Anderson 007

Comments46 | Following

You have every right to question the NPV of Timok.

 

But if I get to a discounted NPV of X does it necessarily matter whether or not those cash flows are heavily front end loaded?

 

If anything, I could argue it might be an investors dream. If Lundin wants to drag out the production they could do what they want? Does that mean it should justify a lower valuation on a buyout? And if the answer is NO according to you, then just leave the NSU shareholder to our own devices meaning we can go it alone as Lundin’s offer was essentially unsolicited.

 

Also, how about the rest of their assets? The fact that Zijin’s offer blows Lundin’s offer out of the water would suggest that your analysis was far too conservative.

 

I’m actually of the opinion, that despite blowing Lundin out of the water, Zijin’s offer still heavily undervalues NSU’s assets. So that’s where I’m coming from.

 

You also didn’t address what I think was a great point by me. So Lundin lost Timok the first time around to NSU but then I guess realized they were actually willing to offer a whole lot more 2 years later?

 

The more I think about it the sillier it sounds which leads me to point more to a failure of Lundin management to capitalize on an opportunity for value creation than towards discipline.

14 Sep 2018, 10:02 AM Edit/DeleteReply0Like

 

Mr. Anderson 007

Comments46 | Following

To add, Reservoir's NPV for Timok Upper Zone at the time of NSU's business combination with them was on the order of US $1.6 billion, since then and proving up and increasing some numbers it has increased slightly to US $1.8 billion under NSU's management. In other words it really has not changed much.

 

YET, Lundin bid on the order of CAD $265 million back in 2016 and just 2 years later bid almost CAD $1.5 billion for NSU wherein the vast majority of the value is attributed to Timok Upper Zone. So Lundin was essentially willing to pay 5x more for the same asset while acknowledging the asset was arguably 2 years closer to any production date!!!

 

If you count all compensation received, I figure NSU paid roughly about CAD $500 million equivalent (it was a combination of loans, shares, and increased late stage cash to seal the deal). So they arguably paid something on that order, declined Lundin's offer of almost CAD $1.5 billion but accpted Zijin's offer of of about CAD $1.86 billion.

 

Hindsight being 20-20, it was a fantastic investment by NSU. Lundin themselves proved they were wrong not to fight harder for Timok.

 

And it looks like they're going to do it yet again. That's "discipline" for you I guess, at least a version of it.