Initial takes on updated PEAThe base case of $3.6 billion is too conservative for the following reasons:
$1,700 should be the Au price and $3.50 should be copper price in the NPV calculations.
Given that companies can borrow funds for 5% or less, the discount rate of 8% was inappropriately too high.
Adding these two together, if properly done (as I was saying all along) you have a NPV in the neighbourhood of $7 billion.
Look, I get it, the PEA has to project the absolute worst case scenario as to give the maximum cushion possible. But, all parties realize that when you start talking about best case and worst case scenarios, the truth usually lies somewhere in the middle. That would give us around $5.5 billion if one wanted to split the difference. Using a 50% of NPV to price the project, that would be around $2.8 billion, divided by the 135 million shares outstanding not owned by RIO yields about $20 a share.
So, my original projection stands. If we were to use the worst case scenario, 50% of 3.6 billion divided by 135 millon shares is over $13 a share. $13 boys and girls, is our worst case, Dale and company fail miserably at negotiations, price per share for WRN.
Or another way to look at it is if $13 is the basement and maybe high $20s the ceiling, add it all together and average it out......which leads us back to $20. I'm fine with anything that is double digits and starts with a "2".