RIO, in its "fair" offer, has called much attention to its engaging TD Securities to arrive at an offer price.
Well then, let's take a closer look into this "fair" offer. TD uses a standard NAV approach to arrive at its Sensitivity Analysis (see page C-18 of circular). Two inputs into the sensitivity, discount rate and long term copper price. For the discount rate, TD has chosen 10%. Its justification for the 10% is purely arbitrary (see page C-12 of circular). TD could have chosen 8%. For the long term copper price, TD uses $3.50/lb, which just so happens to be the current copper spot price. With the global move to "green", this assumption is way understated. Copper consumption will steadily increase while production remains flat or declines. Projections show that world copper supply is entering a deficit position and will remain so into the distant future.
So let's expand TD's Sensitivity Analysis to a more reasonable presentation using simple linear extrapolation for the copper price and a discount rate of 8%.
Low High
$4.25 - $67 - $105
$4.50 - $73 - $113
$4.75 - $79 - $121
$5.00 - $85 - $129
Nowhere in this more realistic sensitivity analysis is the $43 offer. Recall that just a short while ago the copper spot price was nearing $5.00.
RIO is clearly offering a ridiculous low price and presenting TD's selective analysis as justification for doing so.
Vote "NO" to send RIO the message that its offer is bs and opportunistic. I have.