No mate, I also was disappointed with the PFS numbers. The cost was higher than I anticipated for starters. The PFS investment return parameters exclude the USD$70M purchase price as you say, but also importantly PFS calculations exclude the substantial US$110M Working capital and US$41M debt establishment and servicing during construction. Obviously these expenses further dilute a modest NPV for the investment but still, it is a low opex cost, long life project that returns a good operating margin and large free cashflow life of mine.
The real concern for me was the price deck BSE used to get the NPV, IRR etc to where they did. The PFS made it clear that management used their own internal research and assumptions to come up with LOM product pricing, but the prices all seem to be 15-20% higher than reasonable IMO. Looking at the NPV sensitivity analysis they presented, using lower but still optimistic product prices the post-tax NPV could easily drop US$300M from the reported figure of US$671M. Also, the current 2% royalty figure looks a concern given the rates in Australia are 5-7% generally. Who would be surprised if the Madagascar government increased the royalty to 5% after the mine is built, matching the country BSE is listed in, and raising much needed extra government revenue? Good company and good project, but I'm just a bit concerned looking under the hood of the PFS that it has been dressed up a bit to make the numbers look better than they really are.
Cheers
BSE Price at posting:
31.0¢ Sentiment: Hold Disclosure: Held
(20min delay)
