Estimating the Potential Sale Value of Oroco's Santo Tomas Project $oco today: 6 to 9x upside
today market cap 61.44M
Here is a quick rule of thumb valuation, based on the last email from management.
“The sector is experiencing increasing M&A activity, with transaction pricing expected to test the historical valuations of 35-50% of post-tax NPV. It is important to note that Oroco’s current market capitalization of approximately US$70 million represents just 6% of Santo Tomas' current post-tax NPV.” - Oroco - Q1 2024 Update
The mining sector is currently witnessing a surge in mergers and acquisitions (M&A) activity, with transaction pricing anticipated to challenge historical valuations ranging between 35-50% of the post-tax Net Present Value (NPV). Oroco Resource Corp., a company with a focus on the development of its flagship Santo Tomas copper project in Mexico, finds itself in a potentially advantageous position amidst this market trend.
Oroco's market capitalization on the email is US$70 million. However, this valuation starkly contrasts with the post-tax NPV of the Santo Tomas project. To understand the potential sale value of the project, it is essential to examine the implications of selling at the historical valuation range of 35-50% of its post-tax NPV.
Assuming the post-tax NPV of Santo Tomas is the basis for Oroco's market capitalization being 6% of its value, the project's post-tax NPV can be estimated as follows:
US$1.167 billion
Using this estimated post-tax NPV, we can calculate the potential sale value of the Santo Tomas project within the historical valuation range:
At 35% of Post-tax NPV: Sale Value=35%×US$1.167 billion=US$408.45 million Sale Value=35%×US$1.167 billion=US$408.45 million. (Or $1.56 fully diluted shares)
At 50% of Post-tax NPV: Sale Value=50%×US$1.167 billion=US$583.5 million Sale Value=50%×US$1.167 billion=US. (Or $2.23 fully diluted shares)
These figures suggest that if Oroco were to sell the Santo Tomas project at historical valuation levels, the company could potentially realize a sale value ranging between US$408.45 million and US$583.5 million.
It is important to note that these calculations are based on estimates and assumptions, and the actual sale value could be influenced by numerous factors, including market conditions, the project's development stage, and negotiation dynamics. Nonetheless, the potential for a substantial valuation uplift highlights the strategic importance of the Santo Tomas project for Oroco and its stakeholders.