My ROFO proposition
posted on
Feb 01, 2022 11:24AM
CUU own 25% Schaft Creek: proven/probable min. reserves/940.8m tonnes = 0.27% copper, 0.19 g/t gold, 0.018% moly and 1.72 g/t silver containing: 5.6b lbs copper, 5.8m ounces gold, 363.5m lbs moly and 51.7m ounces silver; (Recoverable CuEq 0.46%)
Highlights of the QB2 Sumitomo transaction.
Sumitomo Transaction | ||
QB2 2019 LT copper price | 3.00 | 3.25 |
Estimated total contribution by Sumitomo for a 30% interest in QB2 @sanction decision (in 2019 $M USD) |
1500.00 | 1500.00 |
QB2 EBITDA (100%) First 5 Full Years ($M) Ref. Reserve Case |
1000.00 | 1200.00 |
QB2 EBITDA (30%) First 5 Full Years ($M) |
300.00 | 360.00 |
EV/EBITDA ratio | 5.00 | 4.17 |
Here's how I would (more or less) structure a win-win transaction with Teck. All numbers are in USD.
1) Teck choses one of the options below.
Options | 1 | 2 | 3 |
LT copper price (lb) | 3.25 | 3.50 | 3.75 |
SC EBITDA (100%) First 5 Full Years ($M) Ref. 2021 PEA |
695 | 755 | 815 |
SC EBITDA (25%) First 5 Full Years ($M) |
174 | 189 | 204 |
Estimated total contribution by Sumitomo for a 30% interest in QB2 @sanction decision (in 2019 $M USD) |
1500 | 1500 | 1500 |
QB2 estimated EBITDA for a 30% interest* ($M) Ref. Reserve Case |
360 | 330 | 300 |
Equivalent valuation ($M) for a 25% interest in SC @sanction decision |
724 | 858 | 1019 |
Estimated number of years left before a sanction decision |
2 | 2 | 1 |
Discount rate per year pre-sanction decision |
15% | 12% | 8% |
Current valuation for 25% of SC (2022 $M US) |
548 | 684 | 943 |
Payment terms | Shares and/or cash | ||
* Option 1 assums a QB2 transaction based on LT copper at $3.25 * Option 2 assums a QB2 transaction based on LT copper at $3.13 * Option 3 assums a QB2 transaction based on LT copper at $3.00 |
2) Depending on the option chosen, additional payments to Copper Fox would apply per the below.
Additional payments to Copper Fox | ||
Payable annually during the First 5 Full Years of production | ||
1 | 2 | 3 |
25% of the incremental EBITDA vs. the SC 2021 PEA up to $3.75 US copper |
12.5% of the incremental EBITDA vs. the SC 2021 PEA up to $3.75 US copper |
N/A |
12.5% of the incremental EBITDA vs. the SC 2021 PEA above $3.75 US copper |
6.25% of the incremental EBITDA vs. the SC 2021 PEA above $3.75 US copper |
N/A |
3) Additionally, all milestone payment would still be paid per the current SCJV agreement.
Conclusion:
With this structure:
IMO.
MoneyK