Hi Guys,
I have done some research and most of the previous articles refer to the Silicon Smelter costing $500 million. I also found a few other mentions of Silicon Smelters in other parts of the world coming in at around the same price.
I also think it is important to consider that Management want MHM to be a sole Al/Salt Slag play and therefore will not retain the state in the Silicon Co at the company level (IMO). As a result we as shareholders either A. Get shares in the new company or B. Receive a one off capital return (following the sale of the project).
Seeing as the project is already going to cost $500m I don’t think the partner is going to want to pay MHM/MHM shareholders a large sum to take the project off our hands 100%. As a result we are left with option A. The company will be spun out and listed on the market (IMO).
So what could this mean?
- Seeing as MHM have done a lot of the ground work and held this project for a number of years I would expect that we would get a minimum of 20% (any less and I would be disappointed in management).
- The company who comes in and acquires the project would most likely want 50% IMO as a Silicon project is not like a Gold Mine where you dig it up and sell the stuff to anyone. The company that builds the plant will also be the one using the end product.
- That leaves 30% to be raised via an IPO, which MHM shareholders can participate in as well.
Seeing as our 20% stake is “free”, i.e. we don’t have to pay any more money as we already own MHM shares. Then the $500m must be raised by the Major Partner and IPO. This would mean the Major partner contributes 62.5% of the money or $312.5million and the IPO the remaining 37.5% or $187.5 million. (NOTE: This money may not be raised all in one go as I doubt they could get that much coin less all DA and environmental approvals were in place. As a result that may be the “end figure” a year or so down the track after another CR along the way).
That would then imply that our 20% stake is “worth $83 million”. Calculated by taking $500m that it will cost to develop dividing by 120 (100 for the amount financed by other partners plus our 20% on top) to give a value relative to the projects total cost of $500m. (hope that makes sense – in other words of 20% is funded by others, but we still get the benefit).
Fully diluted MHM has 136,974,395 shares as a result our “implied” value in the project is worth 60 cents per share. However, obviously the Silicon Co once listed wont trade at $500m, given that the Major Partner will probably fund a large proportion of their investment via debt, not equity.
Assuming they kick in $125m in equity (40% of their required $312.5m), plus the $187.5m in equity from the IPO that would give a Market Cap of $312.5 million. And our 20% would be worth $52 million on market or 37.9 cents per share. (Assuming that the company trades at 100% of the equity kicked in). In the real world it will probably trade at less than this, but for arguments sake lets run with the figures
I know it seems like a lot of money, especially when you consider that our share price is under $1. But if this project is to go ahead then there will be a number of announcements along the way that will significantly boost the SP. On top of that we have progress in America. If this was to get our Share Price to $2 then an in-spec distribution of shares in a new company at 37.9 cents (would obviously be rounded up or down to a round figure) would account to less than 20% of the SP’s current value (0.379/$2). Which is definitely in the ballpark of possibilities IMO.
Anyway I just wanted to provide these figures to highlight the “potential” value of the project based on ONE possible scenario. Obviously management and our eventual partner may have different ideas.
As always please do your own research. Also this deal still has some way to go and the figures are very rough as a result. As more details emerge we will be able to work out with a lot more accuracy what the likely outcome is to be.
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