Ann: Torrens Drilling Commences, page-50

Fantasy time??... imo... if we are going to dream lets do it some justice.

AIS has 642M shares [on a fully diluted basis]... so an offer of $4.90/share is roughly $3B. Lets say it takes 2 years to define a deposit and establish it is commercial. AIS is currently trading at a discount to intrinsic value... fair value is more like 30 cents. On forward estimates, once it is debt free, fair value is about 50 cents in 2 years time. So an offer of $4.90 is really $4.40 for Torrens

What if AIS defines a deposit which is comparable in economics to OZL's Prominent Hill. From their recent results... OZL is producing 100k/tonnes per year at an AISC of ~A$2/lb = about $1.80/lb profit.. OZL's 2018 revenue is ~$1.1B, they have $500M in the bank and making  +$500M/year.

To develop Torrens would probably be +$1B infrastructure and take perhaps 3 years. So not selling would mean all up a 5 year wait for a return. OZL's MC is $3.25B and they pay a div of about 20 cents/year.

If an effective offer of $4.40 was put on the table that would value Torrens around $3.75B in total [including ARE's 30%]  Taking that kind of money [if it was offered] looks a lot better than proceeding to production for AIS if they discover something comparable to Prominent Hill.

But, if they duplicate Olympic Dam you can multiply the above numbers by 2... at the minimum. In that case knocking back an offer of $10/share would be a rational choice and AIS stock would be trading in that range. I think AIS would have little trouble securing finance to go it alone. It could be done. The question marks would be... what ARE would do and what would AIS major shareholder do?

The other outcome is we drill Torrens and it is uneconomic. This first hole might put some life into the dream or it might disappoint.