Post by
stockzorg on Apr 02, 2024 6:04pm
NSR Valuation
Some interesting posts recently on the value of Teuton's TC NSR, mostly expressed in terms of what it would sell for today in a very distressed and discounted market. Here are my observations on NSR impact on
TUO's market cap and possible considerations related to an upfront sale.
Market cap: Let's say 400k oz of gold is recovered per year from TC over a 20 year mine life, after all costs and smelting fees etc. 8 million oz. all told. Each year, .49% of the gold or 1960 oz. would go to TUO. At $2k per oz. $3.92 million per year. Since most will come from CS-600 we might need to take copper into consideration as well maybe 100 million lbs. of which 490k lbs. to TUO at $4 or another $1.96 million. About $.10 per share per year as income with no cost and no risk.
I assign a price/earnings ratio of at least 20 to this risk-free cost-free income or $2 per share of stock price just for the Goldstorm NSR. Since this is much more than the current share price the market clearly does not feel that TUO will hold the NSR through the life of the mine.
But if the TUO .49% NSR on Goldstorm is to be eliminated up front there is another issue. All other NSR's probably need to go away as well. The TUO .49% NSR on Area 2, the 1% NSR TUO will buy from St. Andrew Goldfields (SAG) and the other 1% SAG NSR.
Any valuation of TC NSR's needs to include all of this. No mine developer will give away 2.49% over the next 30+ years not knowing gold price or how much will be discovered in the future in Area 2.
In my opinion this puts Dino In a position where he can demand a premium, not a discount, to his NSR's in an up front sale if he goes that route. After the spinouts are done the premium could be buried in a single transaction cost for both the TUO 20% TC interest and the NSR"s to avoid any red faces.
The premium price to TUO and SAG for NSR's is a direct result of Seabridge's failure to derisk the MTT route at a much earlier time, like prior to the AMK option. SA had a singular focus on ozs. of Au per share at that time and failed to act. They also cratered their market cap when they sold Snowfield at $3/oz, setting a terribly low market for any non-core or long-term mine assets. The stock is just now beginning to recover.
The Seabridge LOA to TC may be expired as early as September if the original expiration date takes effect. The court has already made clear that it prefers SA and TUO to settle the MTT issue between themselves. That's what needs to occur so that both parties can get full value for their holdings.
Getting back to final NSR valuation - it is difficult and more likely based on negotiation as opposed to some calculation of what lies in Area 2 or how much more will be found in Goldstorm this year. I hope discussions are well along.
Do your own DD. GLTA. Doug
Comment by
stockzorg on Apr 03, 2024 11:30am
Good catch. Double my numbers on the TUO market cap estimate. Now it shows an even larger difference in what the share price would be if the market was factoring In the full impact of the Goldstorm NSR.