Preliminary Feasibility Study (PFS) update The updated PFS update has been announced and the results are spectacular. The study estimates capex of a little over $30 million. Assume that they raise $20 million of debt from an offtaker and $10 million equity. Fully diluted, there are 22.5 million shares outstanding. If they raise $10 million of equity at $0.70 per share with one half of a warrant, there will be 44 million shares outstanding.
The PFS estimated an after tax NPV of $128 million or $2.90/share using a long term zinc price of $1.20/lb. (current zinc price is $1.50/lb.). At this stage of development, the shares would probably sell at a discount to NPV. If they sold at 60% of NPV, they could trade at $1.75. Once the mine is up and running and meeting the operating and financial projections used in the PFS, the discount would likely shrink or be eliminated.
The press release also indicated that the free cash flow in the first 3 years of operation would be $55 million or about $18 million per year. This is equivalent to about $0.40 per share. At 5X's CFPS, this translates to a share price of $2.00.
It appears that $2.00 is a reasonable target for the share price once the company secures the financing. The shares are very thinly traded and would probably move very quickly once the financing is secured.
For full disclosure, I own the stock.