Here is a brief recap of our current macro factors and how they will impact valuation going forward. It does not need to be pointed out that the valuation must move upward fast enough to account for both increasing dilution and a reasonable return on the already invested equity. For that purpose, if you have say $5,000 on the table, and require a say 20% rate of return for the level of risk, you need to be looking for discounted value to increase annually by perhaps 25 to 30% to factor in 5-10% annual dilution.
Positives:
1) A huge nickel resource that will be increased over time;
2) Major blue sky exploration potential (albeit needing added dilution)
3) A politically stable environment for the task at hand;
4) Majors that would be politically comfortable with the development politics;
5) The majors will eventually need to develop new Ni mines.
Negatives:
1) The location will require infrastructure costs that best be shared with more than one mine /company/ or resource development. NOT should get there eventually, but time works against us . Another resource find or fast forward on Cr would accelerate valuation .
2) Ontario is not a low cost environment , and current uncertainty on BoC rate policy (and corresponding Loonie level) is a drawback. While this should not be a major negative long term, it creates much short term uncertainty.
3) The world economic stage is weak and somewhat discordant, propelling the majors to buy existing operations at a premium rather than taking new mine development risks.The Ni price is good but visibility is weak. Projects with short development times to breakeven cash flow will be first in the queue. I am not optimistic with respect to this one factor.
There are other factors at play, but as these larger ones begin to play out, at some point a major would step in. What cannot be estimated is what the valuation will be at that time and whether the current investment will have been worth the wait and ultimate return. Management strategies near term have to focus on resource expansion, new resource exploration, and balancing the passage of time against discounting and increased dilution. A little luck is needed, since it will remain speculative at the drill bit.
NOT is not alone.
