RE:RE:RE:RE:RE:NI 43-101Bloomfield, excellent rebuttal to Joshua Hall's completed mis-guided analysis of IVN.
IMHO, Hall is emblematic of American shortsightedness, particular as it relates to Africa, whose countries are regarded by Trump as "SH!THOLES" It's an understatement that China's approach to Africa is more polite and benevolent.
As the world's second largest continent with a population north of 1.2B, Africa is an integral part of China's Belt-and-Road master plan to dominate the world economically.
China's inevitable ascent to economic superiority over the United States is something that drives Trump nuts. Worse still, he knows he's powerless to stop it.
bloomfield18 wrote: Obviously, Joshua Hall is very conservative. There is no right or wrong way to invest. However, he used far higher discount rates on NPV (Net Present Value) than any other analyst, with the possible exception of CIBC. Keep in mind that NPV is not cash flow. It signifies cash value today, if you were to sell out rather than stick around for the entire life of mine. If you raise the discount high enough, you can make it appear that there is little to no cash flow at all. Many mines are marginally cash flow positive, yet have a high negative NPV, even at very modest discount rates. IVN doesn’t suffer from this problem which actually reflects a long term destruction of capital.
Which brings up another factor. IVN could sell any, or all of it’s projects, without notice. The Company probably won’t stick around for thirty or forty years waiting to squeeze every last dime of cash flow. This Company is a definite buyout target for those active in the mining business. And we already know Chinese state miners consider the Company worth at least US$2.83 share/ CA$3.68. So, JH’s $2.46 per share price target must by any definition of objective value, be too low.
The higher the discount rate, the less value assigned to actual cash flow, and more to the time value of money. 12% by JH is a huge discount. You’re literally ignoring the reality of billions of dollars in cash flow. 10% discount on Platreef is in my opinion arbitrary. He also assumed Platreef at 4 Mtpa. The Company is shooting for 12 Mtpa. Cash flow and NPV more than triple, as much of the required CapEx is expended by the initial 4 Mtpa. Protests so far have been limited. Where JH sees a residential area, I see a readily available workforce that doesn’t have to be flown into the middle of nowhere. Visit Flin Flon, Manitoba. The mine is right in the middle of town. The town is built around it. You can drive to work from anywhere in five or ten minutes.
The 8% base case discount rate used by the Company is in my opinion, more balanced. It’s conservative without going completely overboard and ignoring cash flow. Mr. Hall is correct we will have to see how flexible the new DRC mining law is. I’d rather get hard numbers though, and then plug 8% into any revised model for all three projects, rather than decimate value with abnormally high discounts.