It will fix itself is right. Here are some reasons why:
I certainly was not happy to see the NPV and IRR this am and that is about all I had time to look at with the full morning of work I had. I needed to step back and really look at what lead to these incredibly low numbers vs estimates that not only I but many had. As mentioned previously, the $80M in contingency (24%) seems excessive when the $330M seems padded already. I believe the PEA has to be within 35% tolerance and if RPA going to be wrong, my bet is they are wrong on the conservative side so that $330M could be as low as $230M. Plug that in the NPV and see how fast the numbers change.
The next number is the cost to produce, $2046 USD which is great as we are 33% of the cost of synthetic and will be able to compete on price with them any day for the next 30 to 50 years. However, I am sure RPA applied the same level of conservatism here and I expect this number to drop significantly in the PFS.
The selling price...that was conservative as well since the selling price average of the 3 markets ZEN is proven suitable for is $9000 USD.
However, the biggest reason the numbers did not match or come close to the numbers discussed is that RPA, with it's conservatism is saying ZEN will average 7% of market share for the whole 22 year project and use less than half of the deposit which is open at depth. With ZEN being able to produce a green product, that companies are looking for to get public support, ZEN being able to crush all it's synthetic competitors on price and to perform as good as or in certain situations better than synthetic...saying they will average only 7% of market penetration is absolutely laughable!!!
Now, all these factors, price to process, price to sell and tonnage sold per year are all multipliers. Any increase in 1 of these has a triple effect on the numbers per year and then a 22X factor over the LOM.
However, getting past the UBER conservatism that RPA used on this project, we still have an NPV10 pre tax of $615M USD!! At 25% exchange rate and 30% of NPV, 61M shares FD, that still give us a fair value per share of $3.78 CAN.
Now, I understand and have seen countless times, when news is late, unless spectacular, there is always a sell on news and that is what we saw today. People tired of waiting, expecting bigger numbers and then not being able to see the numbers that lead to the lower numbers sold today with emotions running high I bet. Some people were not able to understand that even with RPA being super conservative, we are worth $3.78 per share and the long term view has not changed one dollar in my opinion.
There is now officially, no sulfur issue, no flow sheet issue etc. This project has no holes in it. It is a real project that takes time. More time than most since it has never been done but it is being done by a group of highly professional individuals that are focused on the end game!
My call pre PEA was that we would trade at30% of NPV, now $3.78 CAN within 4-8 weeks post PEA. I stand by that call. Those who wish to sell for 50 cents on the dollar, that is your call.
Cheers,
G.
