RE:RE:RE:Capital Raise for Production PlantBigBangOrigins wrote: The realistic payback period we are looking at is closer to 4.5 years because of the lead time to construct the entire production ponds, drill the holes, mill, etc. and then 3 year ramp up to full production of 50k tonnes/year, this is the steady production rate management seems to be signal.
Assuming CAPEX requirements are around $500M and current shareholders equity gets valued by the financier at around $250M (before cash on hand), we are looking at an EV of $750M or 15.6x EV multiple.
If the financier wants to put in 50% of the CAPEX and rest of the financing comes through debt - about 109M new shares would be issued to the financier, bringing the fully diluted shares count to about 237M shares (assuming all warrants/options are exercised). The financier would have a 46% equity ownership in this scenario.
The share price we would be looking at in such a scenario is about $2.30. This is a very conservative scenario in my opinion. However, current share price seems to be indicating significant dilution because of the poor lithium market sentiment, discount given to juniors, and recent delay in financing (a wise move) which seems to have spooked some impatient shareholders.
Your numbers really make no sense at all. First of all, the person bringing money into the company is unlikely to give us $2.30 per share, even if we are worth $3/share. The market values the company under 80 cents a share, so why should anyone pay more than the market thinks we are worth? The market is doing all of the calculations we are doing and knows the NPV and the unrisked value of the investment. And it is trading under 80 cents.
The investment is just as likely to be:
| Current Market Cap | $89 | Million |
| Current Share Price | $0.76 | |
| Investment | $250 | Million |
| Post Money Market Cap | $339 | Million |
| Post Money Share Count | 447.6 | Million |
| New Shares | 330.1 | Million |
The post-money valuation in that case is still 76 cents per share.
Your $2.30 per share post-money valuation does not pass the snift test. Consider:
1) The NPV for the project is about $1.45 Billion, assuming 35K tons per year production, $13K lithium price, and 20 year mine life.
2) The partner is taking around 40% of the production as part of his deal, so the adjusted NPV is $870 Million.
3) The debt in your proposal is $250M, so the debt-adjusted NPV of the remaining share of production is $620M.
A $2.30/share price post-money would imply a market cap of $1 Billion. How do we get to a $1B valuation for $620M of residual project value?