For PAL Longs Who Are Serious Investors (guess that sounds like an oxymoron), Anyway
I have never put much faith in the 'buyout' rumors that show up from time to time, however, I just finished reading the text of the January 2013 LDI Technical Report done by Tetra Tech (on the PAL website). I expected the report to be pretty much a resource evaluation, which it does cover in technical detail.. More interestingly, the report reads very much like a sales prospectus one would present to interested parties if the company were being offered for sale. Give it a read. There is clearly a lot more than a resource evaluation in there. It is a very long read but very interesting. FYI. and Good investing longs!
PAL is giving away many clues related to a possible JV or take over...I did not believe it few months ago but it became a very appealing solution for PAL now as I explained here and on SWC forum. I believe this study is a very good "due diligence" either for financing through loan or equity in one hand or a buy out take over or joint venture in the other hand.
Anyway, it is as far as we can guess now. PAL will certainly release some news about that before the end of June and we will analyze then the best investing strategy going forward.
Chances are that any news about financing will push the pps higher because it already trades at a steep discount now. With palladium around 750 and probably higher soon PAL is obviously undervalued and the real money knows it.
I am waiting on any weakness at around 1.05 and lower to add and even double down under 1 if I can?
I will be surprised to see PAL trading for long under its BV at 1.42. It is risky so just do your DD and invest at your own risk
Interesting find. I somehow missed that study and agree with you that this is far more involved than a typical tech report.
I haven't gone through the 594 pages (and probably won't go through all), but I did notice a few things that jumped out. One of them was the NPV estimation just of Phase 1 as $138MM assuming a Pd price of $675; and over $200MM, with a Pd price of $738. (p. 36)
I had gotten the impression that this was the pre-feasability study. As I recall, there was to be a full study due by the end of Q2, so should be coming out pretty soon. I see how these could be viewed as either a second opinion / justification for financing or possibly an aid in a sale. Though, that doesn't really give us a hint on what interest level there is for either out there.
My impression is that this report helps to re-enforce a perspective that current PPS is awfully low, presuming that funding will occur. OTOH, the company has not helped the situation by allowing financing needs to linger for half a year, which has kept PPS so low that equity is no longer an equitable solution . It's a most unfortunate situation that should have been addressed last year.
Anyway, it is an interesting read for those hungry for data or bored of this board.
So if the NPV is $200MM (it might be lower given that the technical report also was assuming initial capex of $75M, which has since been revised to $140M), and there are 175M shares outstanding, it implies a value per share of $1.15..
This ignores the fact that the company has $82M of net debt as of Q1. Subtracting that we get a total NPV of $118. That makes the value per share $0.67.
It also ignores the fact that cash costs have also gone up (Q1 call) and that they are using a 5% discount rate (should be at least 10% since that is what they are being charged on their debt by Sprott). So where is the upside? And why would SWC pay more than twice the NPV of the project?