Value Favourite Update on PLSDeep-value investor Irwin Micheal has updated his commentary on PLS. I'll paste the new text below, but here's a link should anyone want the full thread and context:
https://www.valueinvestigator.com/valuefavourites/pls.shtml
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November 16, 2007
Polaris Minerals has just released its third quarter results, which comprise the second full quarter of production from the Orca Quarry. Production volumes are steadily increasing and amounted to 488,414 tons over the three months ended September 30, 2007. There is still plenty upside before the quarry reaches permitted capacity of 6.6 million tons per year. The financial results reflect the ramp period, with revenue of only $5.5 million and a loss of $0.05 per share. These results will show a dramatic improvement as sand and gravel sales volumes move closer to targeted levels and costs decline on a per ton basis.
The real news in the quarter was the announcement of a long-term strategic alliance with CEMEX Incorporated, a global building materials company and the largest cement and ready-mix concrete supplier in the United States. Essentially, Polaris will exclusively supply CEMEX in the states of California, Oregon and Washington. Currently, sand and gravel from Polaris’ Orca Quarry is being shipped through two existing CEMEX terminals in San Francisco Bay in addition to Polaris’ recently completed Richmond terminal. Once the Port of Redwood City is operational, the Company will have access to a total of four receiving facilities.
The complex details of the transaction were discussed on a conference call subsequent to the press release. However, the benefits to each party can be summed up as follows. Polaris gains access to receiving facilities in regions where construction demand is expected to remain buoyant. In turn, CEMEX gains access to a secure supply of sand and gravel in regions where shortages exist. The arrangement includes the shared development of future construction aggregates quarries and import terminals. Polaris and CEMEX also agreed to develop the Eagle Rock Quarry and cooperate in the pursuit of markets and terminal capacity for the crushed granite product. It is important to note that Polaris retains the profits from the aggregate sales, which will be transacted at market prices.
The quality and the tonnage of Polaris’ Orca Quarry have never been in question; the business model simply depends on securing access to “gateways” into target markets. We believe that Polaris has made great progress in resolving this limiting factor and is on track to successfully reach and exceed its productions targets. For example, simply adding a second shift at the Orca Quarry could double production without any additional capital. Earnings and cash flow will show substantial improvement as the production and sales volumes continue to increase.