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JP Frey's avatar

Nice write-up. I've some details to add.

About capital allocation, the bad about the purchase of the 3% stake in Tanami Gold, is that Tanami is majority owned by APAC, MLX’s 20%+ shareholder. The good is however, at the time of the purchase the AUD 0.034 price represented a slightly negative EV. At USD 2000 gold the recent scoping study provides an NPV8 of AUDm 17m, so big upside, particularly in light of the negative EV (and even for the AUD 1m market value of the stake). Yes, I hear you scoping studies are just fantasy. However, in July 2015 Northern Star bought a 25% stake in the Central Tanami Gold project for AUD 20m, said otherwise at the bottom of the recent gold bear market (USD 1200) a major miner assigned an EV of AUD 40m to Tanami Gold, or an EV of AUD 1.2m for MLX’s stake. So even using this valuation MLX recently paid AUD 1m to get AUD 1.2m project value + slightly more than AUD 1.0m in cash & securities. I.e. these guys are good capital allocators (although buying back their own shares would have been certainly better for the share price). http://clients3.weblink.com.au/pdf/TAM/01646849.pdf

By, the way MLX comes with a lottery ticket attached.

Should Nico’s CMP project ever get developed that should the value of MLX’s 1.75% royalty should be easily as large as the current market cap. CMP contains 1.56mt of Nickel and 122kt of Cobalt in 2P reserves, at prices of USD 15k per ton of Nickel and USD 25k per ton of Cobalt that is an in-situ metal value of more than USD 26bn.

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Jeremy-B's avatar

Great call - well done

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