RE: Shore Buyout Price Estimate
Maybe it's not how the companies involved would approach a buyout, but I think it is a reasonable approach to determining whether we are receiving fair value for our shares in the event of a buyout, or as a measure of whether the share price is fairly valued. Using a % of in-ground value is OK in a lot of cases but it ignores the cost side of the equation (if the Shore valuations came in at say $80/carat, I can guarantee you that 10% will be a pipe dream since it's no longer economic). Maybe the buyer will frame the offer as a % of in-ground value, but there has to be some implicit recognition of the costs built into that offer. Presumably, a deposit that is more profitable would command a higher price.
Often these two approaches comes out to roughly the same price. Using the $150 scenario this is not the case though (comes in at at $975mil, vs. the NPV of $1.95bil). From that, I wonder if we can deduce simply that the resource is more profitable than is typical? If that was the case, shouldn't shareholders demand more than the usual 10% (assuming 10% is the norm)?