Bit of volatility as market evaluates the Aurelia Minerals raising of $40m for the restart of Federation and appointment of new CEO who used to work at Oz Minerals as Growth and Strategy Director

Some details are below:

So there is a bond of 65m plus 24m Loan note advance term on condition of 40m equity raise

The institution raise for 10m was oversubscribed. That leaves retail to pick the remaining 30m shares and is underwritten.

Seems that the institutions are keen. Why?

To find out why, I thought I use this time to do a bit of revision using the Damodaran Real Option method of valuing equity

Below displays a good scenario where Federation achieves the total cashflows for the 6 year period and a bad scenario where Federation flops and only gets 60% of what AMI sets out to achieve

In conclusion if "Good Fed" occurs only (ie: probability of Good Fed is 100%), we get a change in equity of 30m.

If however the chance of "Good Fed" is 50% and "Bad Fed" is 50% because of question marks on management and execution, our change in equity is about 2.26m.

So overall this is still OK and CR is fairly valued as it is. But if the management hits their milestones, starts production as scheduled and achieves 100% cashflow target as stated in the DFS, then AMI is in for a significant re-rate.

Just an FYI I used 6 years not 8 years as I had trouble doing the cashflow formula initially before using the FV function and decided to leave it. Plus I used the rate of 4% growth on FV (didn't want to get too carried away with 8% but it is obvious the equity goes up more on both cases).

Hopefully everyone found the Damodaran Real Option method useful. Try it on some of the other companies you know are doing a capital raise. Some come to mind include 4DX, IPD, ANX and NXT.

Again this is not recommendation to take the CR! I'm still debating on this as well even after doing the above numbers.

[held]

In the last straw I touched on Federation could be a good asset "in the right hands"

A list of who might be good operators that would show interest in Federation, and hence Amelia metals below:

• 29 Metals
• Sandfire
• Develop
• MAC (Metals Acquisition Corp)
• South32

29 Metals have cash and experience in underground mining and expansion although 29 Metals has issues with Capricorn after the QLD floods.

Sandfire also has cash but have not as much underground experience as they just started underground ops at Degrussa

Develop is another strong candidate and my first preference. But Beament appears as though he has his hands full now in trying to get Woodlawn operational and bidding on another services contract (Liontown) and they don't have as much cash.

MAC is a possibility but haven't really done too much research into them. They took over the CSA mine from Glencore. This is the SPAC with Mick McMullen and Neville Power.

South32 would be at the bottom although they have cash, I have some doubts regarding their experience in exploration in general. And they seem more interested in much bigger projects.

A big warning that these are my opinions only and shouldn't be factored for any decision.

[held DVP and AMI]

I think the update reads fine. The interim CEO seems to be getting the job done. But on the call they did mention that there is lots of variability in the head grade so it is hard to provide guidance numbers.

Funding of Federation still not resovled - need 76m. But the NPV looks attractive. Might be a good asset in the right hands although one quarter for a new/interim CEO does not make a trend..

Love a turnaround play - let's see how this goes. High risk though and it looks like many have got burnt here even though AMI have established reserves and studies.

[held]