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Hi Ferg.gg - I am expecting one RNS at the end of the FSP process to announce the recommended offer to shareholders. There could be a counter offer after that but I believe UBS should have already got the best and final offers from any prospective bidders.
Key point for me is that the absence of any RNS news on bids so far does not mean that there have been no bids put forward ...
UBS acting as an intermediary for one of their clients - UBS as the middleman have bought the shares from a broker and sold them to their client (or the other way round) - hence there is a buy and a sell for the same value ...
Alta - you are most welcome.
Very interesting to see your trajectory models gave an MT valuation of 75p - 115p as this correlates reasonably well with the NPV model for MT flanks at discounts of 15% - 20% (87p - 121p). Lots of other valuations based on estimated resources in the ground have also been indicating a similar range.
I am with Nitrokev - let's just call it £1 ..!!
Hi Alta,
I agree the NPV approach requires a leap as the mine is not in operation. I would imagine prospective buyers will want to use a fairly significant discount factor as they are taking all the risk of getting into production. Maybe 15-20%?
To make the calculation, I took the cash flow figures from Exhibit 10 of the ACF report for the MT flanks and applied the discount factor as follows:
For Year 1, (cash flow)/ (1 + discount%)
For Year 2, (cash flow)/(1+ discount%)^2 [squared]
For Year 3, (cash flow)/(1+discount%)^3 [cubed]
and so on.
Then the value is the total of all the discounted cash flows.
If you are a spreadsheet fan (like me), you can set this up in a sheet so that you can change the discount % and it will recalc automatically.
Hope that makes sense!
RMR - it means they applied a discount factor of 30% per year when calculating the value today of cash flows in the future. (The discount factor is also called the WACC or weighted average cost of capital, i.e the cost of money. )
So, using a WACC of 30%, money earned in 1 year's time is discounted by 30% (divided by 1.3), money in Year 2 is divided by 1.3 ^2, Year 3 divided by 1.3^3 and so on. Obviously, the discounted value of cash in the future is hit dramatically at such a high WACC.
Using ACF's cashflow projections but with a WACC of 12%, gives a valuation for 80% of MT flanks of £ 4430M at an exchange rate of $1.30, compared to £1476M for the WACC of 30% as shown in the report. Dividing by 2967M shares this would be 149p per share.
RMR - I posted this revised calc for the MT flanks a while back based on adjusting the ACF figures. Obviously the ACF NPV is based on the mine being in production ....
Once the MT Flanks license is issued, the risk factor is obviously reduced and the value is obviously increased. For example, applying a discount factor of 12% to ACF cashflow figures for MT Flanks, I calculate a revised valuation of £4,430m for EUA's 80% share which equates to 149.3p per share, assuming £/$ of 1.30 and 2,967m shares.
Yes exactly Ferg - as others have said already 3 months would be a reasonable period for a sale process.
As we are now 8 weeks from the start of the FSP I would guess that final offers could be on the table. Perhaps explains why the MT flanks RNS was brief because it's just not important any more ...
It is going to be a massive 3 weeks ... IMO!