RE:RE:RE:RE:3rd Q results, Remember to breathasforecasts wrote
Scarda, thanks for the post.
I still kept some shares but the impairment charge on Ana Paula is huge and no details were released on why with a higher POG and great looking technical report the company took it down by 66%. I, too, would like to buy more stock lower and see some visibility on Ana Paula. Florida Canyon has P&P of .37grams/ton and a company needs to be as efficient as Argonaut Gold to generate pos cash flow and profits with that deposit. ALO is not (yet) even with a spanking new fleet.
Ana Paula was discovered in 1972 and never built. Why? Why is mgnt cutting its legs off? Impairing it to $37mil gives them a built-in loss on the property in the event of a sale and it is the best property in their portfolio. Timmins bought it for $113mil in 2015 and Alio is no more than a name change from Timmins.
I would buy more ALO if these questions could be made clearer but mgnt does not communicate in details.
------------------------------------------------------------
Yes the grade of gold is very low at Florida Canyon. I thought it was a little higher. At present the AISC is around $1380. Their techincal report says they should produce at aprox. $1050 per ounce. Even if they are able to get it to the mid point of these two numbers with new equipment or apox. $1200 on 70 000 ounces per year that still would generate a cashflow of aprox. $300 per ounce or $21 million US or $28 million Canadian at $1500 US gold.not bad for a company with a $65 million market cap. At 8 times cashflow that should equal a market cap of aprox. $224 million or aprox. 3.5 times the current market cap or a $2.60 shareprice.
What i am saying is that with the current extremely low market cap. of this company because of all the problems and lack of profits they have had for a long time which has driven sentiment on this company to all time lows even if they perform somewhat well on a low grade deposit and start making some profits things can turn around and the shareprice should rise quite a lot from thes levels. Looking back only two or three years ago this was a $7 stock.
As for Ana Paula i dont know what is going on with it. The problem is that it would be a real good money maker but they dont have the money now to develop it untill they get the current mines making cashflow. It is still a very good asset for the future as the grade is over two grams per tonne. so i wouldnt write it off yet. They could either develop it in the future, or sell it anytime for a good price and buy another producing mine. A possible joint venture could also happen with the partner paying the capex and Alio putting the mine in as their share. This type of deal would not need the company to put any money and still get half the profits to go along with Florida Canyon.
lots of possibilites but the first thing is to get Florida Canyon churning out some nice cashflow and then the rest will come in time.
The good thing is that these shareprices even if things dont work out as planned there should not be that much more for the shareprice to fall unless the company goes bankrupt which does not appear likely in the near future.