Good observation there. The management are building a mining company here. This is more than just about NST and it’s desire to be at the table. The company already has the asset base to become a producer this year and the bankable fes study should allow them to lock in a bank loan to complete the refurbishment. I doubt the company will need to come back to market with that option. It also means that the company could pay off that loan within 2 -3 qrts on my envelope numbers so any bank will feel mighty safe.
Referring to the recent preso AISC for the first four years are sub A$1100 and the current gold price is over A$1600 so we are looking at a margin of approx A$600 per ounce x 100,000 pa. The company would have tax losses so tax would be minimal. That means that EAR could be pumping out over A$1m a WEEK profit.
You can see where I got my repayment schedule from.
The current market cap is A$150m. This is where I get the forward PE x 3. NST is 28x. I suspect NST will get a nice value uplift once it buys EAR.
As a producer EAR will have a solid re-rate and should be more like 60c sometime this year without further exploration success imo. Given the exploration upside and mine life already, it seems likely to me to be higher down the track.
I consider that a good return and why I have bought a decent chunk of stock. It’s seems like a relatively low risk 100% owned Aussie play. I also think the funds will come for the ride as it will be totally derisked going into production. Please dyor and confirm your own numbers.
EAR Price at posting:
31.0¢ Sentiment: Buy Disclosure: Held
