Another thought.
Let's say you own a block of land with a DA to build a block of units. The land is valued at $10M given its existing use.
Using a discount rate of say 10%, the present value of the proceeds from the sale of the units after construction costs (excluding the land purchase) is say $15M.
Therefore, should the developer pay $15M for the block of land?
No. Because $15M only represents a 10% return to the developer and they can invest anywhere and get a 10% return with a much lower risk than constructing a block of units due to the uncertainties of constructing a block of units (weather, labour issues, input costs, etc.).
The developer is going to want a margin above that 10% discount rate as a return for taking on that risk and uncertainty.
If we make this comparison to Kalkaroo, I think there is a lot more risk in developing a new mine than building a block of units. Even more so given that all we are talking about is the results from a PFS. This is not a bankable feasibility study. Therefore, the risks are greater.
I fear that management want to get something close to the NPV on the PFS because they are too emotionally (and in the case of at least one person, financially) invested in this asset.
They need to step back and appreciate that there role is not to build mines, not to build jorc resources, but to build the wealth of their shareholders and waiting too long for someone to pay the amount equal to the NPV or even close to the NPV is unlikely to happen.
But they could do a deal that will build wealth for the shareholders and give the company many options to further explore and or develop its other resources (and stop dilution from issuing more shares to make that happen). And that will build even more wealth for all.
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