RE:RE:RE:RE:RE:RE:Initial takes on updated PEAWhen you refer to the "market" who are you referring to? The investors slowly accumulate, they generally aren't selling but are building their core positions. I assume you are referring to the hot money or the day traders or the momentum chasers, those who move the share prices sizablly in any direction at the margins (i.e. trading price of the shares).
OK, so the flippers lost interest because the steam from last month's advance has worn out. So, how does that affect the actual value of the mineral wealth in the ground or the NPV one iota? It doesn't.
RIO can make a lowball offer, then walk away and acquire all the shares on the open market you say? Well, wouldn't they have to acquire in excess of 50% to take out the company on terms favourable to them? What would that do to the share price? Way more than that $3 you keep bandying about. Furthermore, HOW would they even get 50% of the shares when the majority of shares are tightly held by strong hands?!
Oh, and the BoD was one step ahead of you there - don't you remember that RIO is restricted from acquiring shares in the open market? Yeah, pretty smart of those "delusional" members of the BoD, eh?
So, we're back to where I've said we are: both parties know the figures that have been presented and the dynamics surrounding how those figures are calculated. They'll negotiate out what Casino is worth in today's dollars and how much of a discount is feasible. They will also negotiate what is (an accounting term here for you) known as goodwill. What is goodwill you ask? Well, once the price for the "on the paper" value is finalized, RIO and WRN can iron out what size, location, blue sky, lack of environmental overhang (Hello Northern Dynasty!!!!) and other intangibles are worth. Oh, you conveniently forgot about that didn't you? Good think I am an accountant and can remind you such things.
RIO is at the table, they agreed to those terms, they want Casino in their pipeline, those are the facts. Negotiations are an art, and I don't claim to know how good either party is at it, other than I am sure it is a rodeo that RIO has been involved with a time or two in the past.
If RIO wants a high discount to NPV, the BoD needs to advise that is acceptable if normal terms (higher metal prices and reasonable discount %) are used. Oh, RIO prefers the conservative NPV figures? OK, then they won't be getting a 50% or higher discount off NPV. Remember, the BoD has a fiduciary duty to shareholders to maximize value for the shareholders, not for RIO.
Maximizing shareholder value does not mean being greedy and blowing a deal, it means dealing fairly with your partner. Rest assured, that both WRN and RIO are partners on a path towards a mutually favourable outcome.
Remember, the payback is 3 years and there are an additional 44 years of cash flow free and clear. You think RIO doesn't know the value of this? Oh and that doesn't even account for the blue sky, so we could easily be talking 50+ years of a cash cow. If you were on the RIO negotating team and threw out your $3 a share offer you would get laughed out of the room.
Actrually, you should try that: Pick a local dealership, walk in and tell the sales manager that you'll give him 10 cents on the dollar and that if he rejects your generous offer that he'll be left with nothing but a bunch of unsold vehicles sitting on worthless moose pasture. Do you think he'd take you seriously? Now, ask yourself why many here don't take you seriously also.
Cheers!