Bullish Forecast In his Jan. 14 Seeking Alpha article, Paul Frank upgrades his view on CDE to Strong Buy. This encouraged me to come back to this mine, which has been very disappointing in recent years. In the comments, the author proposes a "free" cash flow generation of $500 million per year by 2025 with gold at $3000 and silver at $40, while he discusses at current prices metals a free cash flow between 200 and 250 million for the next year. Challenged by these figures for once encouraging, I did my best to examine whether they were in line with the forecasts contained in the presentation published on December 15 during the day of investors (see link). It is clear that yes.
Based on forecasts of production, CAS, capital expenditure and metal prices cautiously assessed by management ($1800 and $22), we should go from largely negative free cash flow in 2022 and 2023 to positives of 240 and 340M for the following two years. It goes without saying that with the aforementioned prices of $3000 and $40, the figures would be much more positive and multiplied by almost 3 (without taking into account the taxes, the rates of which I do not know, in particular taking into account the losses reported in principle deductible from the tax base). Nevertheless, I prefer to stick to management's cautious forecasts on this point.
On the basis of these considerations alone and by applying the coefficient of 10 retained by the author (which I find adequate, it was up to 16 in 2016 I believe), we could consider that the current capitalization of CDE is weak, and even that the title would be particularly promising if the prices of metals finally end up rising. But the management of CDE has so often disappointed the shareholders that it is difficult to rule out further disappointment!
It can also be noted that the reserves and resources cover 10 to 15 years of production and that CDE is less valued than its peers on this basis. Moreover, even if Silvertip is in lethargy, this mine has a significant value, I read without being able to verify it that it would be the second richest silver, lead and zinc mine in the world. It therefore has great potential, whether under CDE's own management, a partnership or a partial or total sale, but additional drilling and studies will be necessary to better assess it.