RE:RE:Rio Tinto New Copper Chief
In terms of timing I question whether it makes any difference. Rio Tinto has not yet settled a significant variability in the cost of the TRQ buyout - the Pentwater dissent valuation is not yet settled as far as I know. That is potentially up to a few hundred million dollars in play. Payment of a premium value for Hugo North Extension to ETG would be counterproductive to that dispute.
As for value it's all a question of opinion not fact, but I am of the opinion - relevant metals prices used to value HNE to date are too low, the size of the HNE Lift 2 ore reserves are understated significantly due to lack of drilling, and the up-value of accelerating and expanding OT production capacity is understated. All of which plays into price to be paid for a negotiated ETG buyout price.
BUT, I'm more convinced then ever that the reason ETG's negotiations go nowhere and we just wait Rio Tinto's timing is that there is only one final pathway - the only issue is finding a price and Rio Tinto believing it is time to trigger the transaction if an agreed price can be negotiated. And the key factor there is that Rio Tinto has in my mind assured the Mongolians they would settle all outstanding issues including ETG, resulting in OTLLC owning all of OT.
In the meantime, at a market cap of $300 million CDN more or less, is ETG dead money? Far from it. One: metals price trends are up for both copper and gold. Two: time to production time reduction increases NPV calculations for ETG in excess of 5% annually. Three: Even applying a full 34% discount (and there are arguments why ETG should not bear that financial cost of Mongolian ownership) the current market cap valuation, by a variety of measures, is extremely low - NPV calculations are already based on metals prices that are 25% or more higher today.
I'll take a reasonable discount and leave money on the table to be paid out in cash. Any reasonable shareholder would. But not a rip-off price. We are so far below fair value today I don't really care what the daily trading price is, and judging by how thin the volumes are and how big the price spreads, nor do the majority of shareholders feel any inclination to go to market with their shares. It's just margin shares at the low fringe trading now. Look at today's trading - implied market cap up by $14 million on $37,000 worth of stock traded on Toronto? Pfffffft.
Be right, sit tight and long. End of the day if you believe in copper and gold appreciating ... we have lots, with lots more to come.
cg