RE:RE:RE:RE:CRUX investor interviewLet's dig into that 50% figure a bit.....
The $2.3 billion NPV figure is using an 8% discount rate. OK, if everyone involved is in agreement that 8% is a proper rate, they are implicitly agreeing that inflation is much higher than the official figures attest to. So, what metal does better in an inflationary environment, gold or copper? Gold does. And haven't I read a few times in previous posts that gold miners are more likely to use a 5% discount rate instead of the 8%?
Let's just forget that the $1,700 gold used in the base case is extremely conserative and let's just forget that Paul is now indicating that the base case is only 1/3rd of potentia mine life. Let's just use the 5% discount NPV figure and that gives us $4.1 billion or $3.2 billion USD. If you take that amount x 50% and divide by the shares outstanding, that is about $10 a share. Throw on the usual premium in a buyout, that takes us to around $13 or so?
Hmmm.........my $10+ figure isn't looking so unrealistic now is it.
For those who would complain that everything has to revolve around the conservative base case figure, you know nothing about negotiations. Negotiations are a give and take. If the suitor wants to get 66% of mine life for free and a low gold price they don't ALSO get to have a bloated discount rate.
Long story short, I walk away from the recent Crux interview convinced that Paul & company aren't going to part for single digits. Sorry Sooner, no $6 from my vantage point.
I do agree that RIO or any other suitor could "argue" that a lowball offer is fair based upon current distorted market capitalization, however, that leaves us exactly where we are right now. If we have to wait for the share price to catch up, then we wait. Future gold prices will take care of sentiment and sentiment will take care of the share price and share price can grease the skids for a buyout.
In the meantime, we plow through with permitting. The closer this gets to shovel-ready, the more $$ it adds to an eventual buyout price tag.