GREY:NMKEF - Post by User
Post by
materialsgirlon Sep 01, 2019 10:40am
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Post# 30087088
The next hurdle is to get the financing deal done at 25 cent
The next hurdle is to get the financing deal done at 25 centIn theory, this will be known by the end of October.
There is a risk that Pallinghurst will ask for more time.
There is a risk that they will ask for a better deal.
They could ask for a lower price (23cents?) or they could
ask for 300,000 free shares as compensation for backstopping
the capital raise. This would be good for them and they only care
about what is good for them.
Nonetheless the chance is good that it will go ahead as is.
The next challenge will be to get the mine producing at capacity.
We need to be cautious about the capital structure.
We might have 3.4 billion shares at 25 cents for a market cap of
$850m. You might then apprasise the assets as being worth
$2 billion.
Therein lies the trap for individual investors. The equity investors only
own a portion of future profits.
The royalty may claim 40% to 50% of operating mine profits. It is a monster
life of mine royalty with no relief over time (as far as I know). It could be less
or it could be more depending on the price of lithium.
The high interest debt will take away 15% to 20% of operating profits over
the life of mine. The percentage is much higher in the early days.
We cannot predict with any accuracy because the percentages would change
dramatically as the commodity price moves up or down. At certain low prices
the royalty and lenders would take away more than 100% of mine operating
profits.
The point. After estimating the value of the properties there is one other big step
before computing a NAV per share. You need to deduct the value of the royalty as
well as the value of the high-interest debt.
Be cautious. Funds and big investors are all aware of this.
mat