Exit Trade: Wolf Minerals
Wolf Minerals released its anticipated DFS on Monday with rather disappointing results. I sold out immediately on the news (after a mad scramble to skim read the announcement), which turned out to be a good call as the price has nose dived:
Here were my key take away points from the announcement:
NPV of $AU118m with APT price $US360 / mtu (almost half fully diluted market cap at time of announcement)
NPV of $AU214 at current APT prices
Project for 9.25yrs instead of 13yrs
Capital expenditure circa $AU160 as expected
Opex higher than originally expected (this had large impact on calculated NVP's)
The mining operation would be for 345k mtu instead of the anticipated 360k mtu
The NPV values are certainly lower than my spreadsheet calculations had showed. This was a combination of points (3), (5) and (6).
The company expects to equity finance 50% of the project, so if they can get the SP to $1.00 then that will almost double the number of shares on issue, not leaving much upside for investors.
I would expect a capital raising around $0.40c when the time comes... barring an even more miraculous increase in APT prices in the short term.
As a very rough calcualtion, assume a cap raising at 0.50c:
$80m / $0.50 = 160m shares = ~270m shares total on issue post capital raising
NPV = 214m (at current APt prices) = $0.80 share price = 100% return from here
Return would probably not be realised until the project is fully commissioned
The numbers aren't as good as i hoped, but WLF will continue to be a great play for raw tungsten exposure.
While I am still bullish on the Tungsten market as a whole, I'm currently cautious of a down turn in commodity prices and the Chinese growth story... but that's probably a post for another time.
Trade Details
I traded in and out of WLF and WLFO with most buys taking place from $0.32 - $0.42 and most sells > $0.50