This is an interesting one with a few moving parts to consider but at least they're effectively buying an income stream, unlike most of the micro cap market, which prints endless equity to fund pie-in-the-sky exploration.
I don't think the market will go nuts for this but we could see a surge on open, which i would sell into (e.g. i'd take a 50-100% profit and wait for the dust to settle)
For those more familiar with mining stocks, it's almost like investing your upfront capital costs to extract a future income stream. And like many mining projects, the upside value (from a shareholder's perspective) comes not from the initial discounted cash flows that are projected, but the potential upside of exploration (in this case, an expansion of the housing project and thus greater cash flows)
Now, based on targetted figures, the parties seem to consider $10M NPAT after 3 years to be a reasonable profitability to trigger a milestone payment of $2M. The cash flows would be as follows, assuming they are met:
- $10M @ n=3 - $20M @ n=4 - $30M @ n=5
I haven't discounted for the $2M worth of equity issued as each milestone is reached but that would be dilute s/h.
So upfront capital costs of $55M against the above projected cash flows. Haven't got a calc to do NPV but not a bad scenario but like i said, the overall reason for buying-in would be for expected upside in the housing development and possibly other contracts.
Overall thoughts would be to sell the open if price rallies significantly, then wait for more details. Not advice, just my opinion and could be wrong, like anyone else who has an opinion.
SOI Price at posting:
0.7¢ Sentiment: None Disclosure: Not Held
