Tara Minerals Corp TARM

Neew analysis TARM

[FH_Trader]

A new analysis from Joe Noel from yesterday.
It looks very promising for TARM/TRGD.

Potential Profitability for Tara Minerals Very Promising
by Joe on June 7, 2011

This weekend we took the opportunity to do a little digging into the mining industry. (No pun intended!) In particular, we examined what we believe is a strong comparable company to Tara Minerals, called Scorpio Mining Corporation (TSX: SPM), in order to analyze some of the profit opportunities this industry presents.

Scorpio is a profitable Canadian-based silver producer in Mexico with significant base metal by-product credits. Like Tara Minerals, Scorpio Mining conducts mining exploration, development and production efforts in Mexico and currently, Scorpio has one producing mine, its 100% owned, Nuestra Señora silver-zinc-lead-copper mine located in Cosalá, the State of Sinaloa, Mexico, which achieved commercial production in January 2009.

For its most recent Q1:11 financials, Scorpio reported revenues of over $18 million, operating earnings of $9.98 million and earnings per share of
.03, proving its mining operations to be nicely profitable.

What we think is interesting here, is that as a mining with operations similar to Tara Minerals and the ability to show a solid profit, we believe Scorpio’s operations represent only a fraction of the potential that TARM holds. In our view, shares of Tara Minerals currently hold even greater profit potential than Scorpio, despite the Company’s slightly higher operating costs, given the superior grade of TARM’s mineral assets, fewer shares outstanding, and additional valuable mining properties (we’re referring to TARM’s Manzanillo Region/Tania Property that produces globally demanded iron ore and its Picacho Groupings with the potential for at least 1+ million ounces of gold).

Interestingly, while we believe Scorpio has lower operating costs at about $33 to $35 per ton according to our estimates, compared to a conservative $55 per ton or less for TARM, the quality of Scorpio’s grade is only about 1/3rd that of Tara Minerals. (See chart below)

—————SCORPIO MINING——————–TARA MINERALS——-
……………Average-Processed………………….Vein-1…….Vein-2…….New-High-Grade
……Head Grades During Q1 2011…………….………………………..Structure Samplings

Silver (grams per ton)……115…………………309…………770……………..400
Gold…………………….……NA……………………NA………….NA……………..1.47 (g/t)
Zinc………………………..…2.49%………………9.0%……….27.0%………….7.48%
Lead………………………….0.98%………………3.0%……….11.0%………….4.92%
Copper………………………0.42%………………NA………….NA………….….NA

Additionally, Scorpio has about 3.3x as many shares outstanding, compared to Tara Minerals, at about 190 million for Scorpio Mining vs. just 60 million for TARM. At this rate, we believe EPS potential at the Company is very strong, as soon as TARM becomes profitable – which we expect will be in the near future.

Also, Scorpio has a market cap of just under US$250 million, compared to Tara Minerals’ current market cap of $78 million. While we continue to believe TARM has the optimal mineral properties and profit potential – as its cash situation turns positive, if TARM’s market cap were to rise to a level seen at Scorpio Mining, we estimate shares of Tara Minerals would be worth an implied price of $4.13 per share; that’s an increase of nearly 220% per share at the current TARM share price of just $1.30.

Thus, we believe the results reported by Scorpio Mining serve as a strong “proof of concept” for profit potential at Tara Minerals with its significantly superior mineral and metal properties. In fact, with relatively low costs and operations that we expect to start generating cash flow in the near future, as early as Q4 at Don Ramon and potentially even earlier at TARM’s Manzanillo Region/Tania Property, we think Tara Minerals has even greater profit potential and expect to start seeing these numbers coming in later this year, with further improvements in 2012.


https://www.joenoelstocks.com/uncategorized/potential-profitability-for-tara-minerals-very-promising/