PLS 2.13% $3.83 pilbara minerals limited

What happens to the SP in the even of a 49% asset sale?

  1. 2,303 Posts.
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    Hi All,

    I've been reading a lot of posts and I have a few questions.

    What do we think happens in the event of a 49% sale to a partner?

    Debt goes away, money is there for expansion, revenues and profits will obviously decrease by 49%, as will costs, but we will effectively "lose" a customer (assuming one of our existing customers is the purchaser).

    There will be the risk associated with having to build out the expansion, and I am sure a number of other negatives.

    My thoughts / hopes are these...

    - Total sale price will around the $700m mark
    - POSCO will be the ones who buy the 49% and we have a nice partnership and tie in with downstream processing.
    - There will be an equity swap for downstream processing which may reduce the actual cash we receive - but it all comes out in the wash.
    - Obviously zero debt
    - Cashflow positive due to no interest payments
    - Fairly hefty war chest
    - Much less short term exposure to price sensitivity

    I am calling a SP of $0.65 - $0.80c after the transaction, but the company will be in a much healthier position financially, and the cash in the bank should put a floor under the SP.

    The benefits of the expansion will be years away, and the glut of supply coming online will keep short term revenue growth muted.

    Hopefully the stars align, timing is right and we bring on the additional capacity as prices to start increasing.
    Last edited by thecrabpest: 30/07/19
 
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