 Good day, fellow investors! Welcome to part three of the four stocks to buy in November series. Today I'll discuss another stock that I have already covered in the past few months and that's Nefsun Resources. A lot of things have changed. I want to discuss what has changed and why I think it is still a cheap stock with very, very good potential in the future. I'll quickly touch on what happened with the new updated pre-fusibility study. I'll discuss if Nefsun is a takeover candidate in order to show that the value is going to be unlocked pretty soon. We don't have to wait until 2021 for Nefsun's value to unlock. And secondly there is some very interesting news from Serbia. I don't expect most of my viewers speak Serbian so I think I can add value from that perspective. The first piece of news is that Nefsun released an updated preliminary economic assessments of their main project, the Timok Upper Zone project in Serbia, which is a high-grade copper gold project. The net present value of the project remained the same at $1.5 billion, which would be a value of $5 per share. The current stock price is $2.35 as I'm filming this. So there is already a huge difference just from there. However there is still a lot of risk in developing the mine but what I liked about the management is that they are very very conservative. Unlike the previous management as Nefsun changed management in the last six months the previous management was excited about everything and then they would of course miss expectations then investors would be disappointed and we have seen the result on the stock price that went just down in the last few years. Nevertheless this management is the opposite. Bad news is immediately delivered no promises except for something that's really the case like in this case the Timok preliminary economic assessment where if you listen to the conference call the management said it was really really conservative. So in the future we can expect more upside than downside which is very important. The management didn't mention the lower zone exploration at Disha, nothing that could tangle our imagination that just looked at the facts and that's also what I'm going to do look at the facts and see what's the value in Nefsun and I'm going to look at Nefsun from a takeover perspective. Does it pay to somebody now take over Nefsun the whole company? Before I dig into that just let me show you a point that's very very interesting. When asking a question an analyst commented that now that the infill drilling does more drilling has been done into Timok only now and that the resources are changed from inferred resources to measured and indicated only now he's allowed to market the company to his clients. So that's very interesting and shows how a do-it-yourself investor can be ahead of the mining investment establishment because we had Timok first drilling then we had infill drills to confirm the ore body which was reported a few months ago and confirm the high-grade ore but analysts are allowed to market and discuss only after a preliminary economic assessment has been done only after the ore is transferred from inferred to indicated and later when the feasibility study comes when everything is confirmed then we'll see even more institutional coverage of the stock. So now it's still shady however if you look at the grades the grades are really high but later with the pre-feasibility study going into the first quarter of 2018 I really expect positive catalysts to push Nefsun to a fair value not five but significantly higher than where it is now. So we can see here how they lower the inferred tons and increase the measured and indicated tons that's very important for analysts because they need measured and indicated resources not inferred resources. Next catalysts now with indicated resources Nefsun is continuing with their promotion marketing of the Timok zone they will make a marketing trip they will meet with smelters and other off-takers for their current copper and zinc products from Bisha and Timok and also they are organizing a Timok upper zone site visit in Serbia so very very interesting and open to investors. Now what I want to focus is okay is Nefsun a takeover candidate a fund would be interested in only one thing what's the cash I need to invest and when do I get that cash back and what's the profit so from that perspective a private fund let's say wants 15% return on their investment and let's see at what level Nefsun delivers a 15% return on investment we said the preliminary economic assessment had present value is 1.5 billion however a fund wants to see cash flows at the current stock price the market cap is 700 million so let's say somebody comes in gives us a 30 premium and says I'll take out Nefsun at 900 million 900 million would give the buyer 115 million in cash so 750 million is actually the paying price then Eritrea is very cash flow positive I expect there are at least 120 million in cash over the next three years zinc prices are high copper prices are high I also think they could sell it for 150 million so a fund could buy Nefsun at 600 million in cash now the initial capital requirement to build the mine at Timok is 630 million with high contingencies I think the contingency is 16% the cash cost fully allocated cash cost which is the sum of operating costs indirect costs and net interest charges is 1.59 per pound that's the average over the whole 15 years of the mine so the fund could take a loan at let's say 7 8 interest rates which is the case that I see now for such projects thus the annual cost would be around 50 let's say 60 million in the worst case loan scenario let's then look at what's going on the Timok project is front-end loaded with cash flows because in the first five years the copper grades are extremely high and the gold grades also so the most of the copper that will be extracted will come in the first five years which is excellent for paying back the investment and for cash flows the average was cost the average cost was 1.5 so I expect an average cost below one in the first five years and then a cost of two dollars per copper pound in the latter part of the mine plan still positive nevertheless so I have made a small table where I delay the production for one year so I expect the bulk of cash flows not to come in 2022 but 2023 and then if we estimate the 140 tons of copper that will be sold at all in cash costs of one dollar we get 646 million in cash flows plus 100 million from gold recoveries if the recovery is 30 percent as the company discussed there are also pirate cents which could be just a bonus but that's something for the future similar year to 2024 2025 then 2026 we are at 400 million a little bit less in cash flows so summing up three years of 600 million plus 400 million we are at 2.2 billion in cash flows up to 2026 if I take out the 100 million in sustaining capex depth repayments I get to 1.8 billion in cash that you can take home up to 2026 going back to the table what's the return I calculated the return at a 15 discount rate which is something that I think a private fund would expect so if they pay 600 million now present value of the future just four year cash flows is 665 million thus the net present value is positive and at 65 million so if a fund decides to take over nevson now and let's say pace 965 million it would get a 15% return on the investment by selling bisha and taking out the cash immediately by 2026 on the invested money only from the first four years of timok i'm not counting in the lower zone i'm not counting in potential exploration at timok nothing only the first four years of timok however there is potential exploration the management said that geologically there should be more high-grade mineralization at timok and if you look at the city of bor all around of it there is copper so if they find something that's valuable that could be a great great catalyst and they are drilling i think another 20 targets so we'll so we'll see what will be the results there so i also have to mention that in 2022 copper should be really in peak deficit and that should really push copper prices higher especially with the ev trend and everything that's going on asia developing and so on and so on so we can see much higher copper prices so that was the case for the private fund taking over nevson however there is something even more interesting going on in syria and if you speak syria and you can know that if you don't speak syria and you can difficultly get to that information let's dig into it hunan gold a company from the province of hunan and we know the chinese want to get their supply of base metals for the very long term and they are buying assets for their long term supply because they know copper will enter in deficit and they want to develop their country it's the government buying this so hunan gold is entering the bore smelting and mining complex that already exists near timok the property of the mine is from the syrian government that is not so well managed but hunan is willing to invest rebuild they just build a new smelter so so my idea is that when hunan buys the smelter buys the combine it buys the bore mine that they will also look how to synchronize other deposits around bore in order to take advantage of what they have there and when they see nevson at such cheap prices they will really snap it because not only of the upper zone lower zone and exploration potential because these guys are not buying for 15% return immediate they are buying to cover the demand china will have for copper in the next 40 years the transaction is expected to close by year end and i expect in 2018 again hunan gold to look at nevson especially as nevson remains this cheap but i don't think that will happen so i really think nevson has a margin of safety there is 1.5 billion in the net present value of timok which is confirmed with the last pea so upside is large exploration whatever the downside is limited and i think nevson will now with the confirmation of the grades with the confirmation of the ore body with the confirmation of resources be eyed by funds other companies that want to take over the snap the company that has been plagued by pet news over the last few years they will like to take advantage of that at the cheap price so a buyout target will immediately propel nevson stock price higher and set a downside limit to it i expect some things like that to happen in the next few months six months 12 months so it will be a very very interesting in the long term you're exposed to copper and gold and zinc from erythria so very very interesting base metal play at a very low price thank you for watching looking forward to your comments and i'll see you in the next video