ABI
Elder
Current resources support a 25,000 oz Au/yr operation for 8-9 yrs.
Total Costs are estimated at $500-$600/oz.
Resources were calculated last in 2009. So all 2010 and 2011 drilling at Elder and Tagami will be input into the new 43-101 report that is expected to increase the current resources to around 500,000oz Au. That could double the yearly Au output at Elder from 25k/d to 50k/d for 8-9 yrs by the time the mine is dewatered and online sometime at the end of next year. At $1,400/oz Au, cashflow would amount to about (50,000oz)(1400-600) = $40 million/yr.
Abcourt
With an expansion to 1mm tonnes/yr for 13 years from the current 650k tonnes/yr, ABI’s current resources of Zn (3.11%) and Ag (55.09g/t) look to produce about 65.8 mm lbs of Zn and 1.58 mm oz Ag per yr at a 96% and 89% recovery rate for the metals.
At $1.05/lb Zn and $37/oz Ag, the mine would produce $127.55 mm/yr in revenues.
Total production costs are estimated to be $24.61/tonne so $24.61 mm/yr.
Overall annual CF = $127.55 - $24.61 = $102.94 mm/yr
So total company CF = 40+103.94 = $143.94 mm/yr when both mines opened up and at current metal prices.
I’ll assume 300 mm shares diluted by the time both mines are open for business as ABI will have between 190-210 mm shares diluted after this financing ($3.5 mm up to $5.5 mm), without the triggering the 15% overallotment option which will probably happen (financers make more $ when they do so why wouldn’t they try to get it?). Their not the best finance negotiators. Most other junior minors give up ½ a warrant/unit, where ABI gives away a full warrant and then pays out a 6.5% finders fee when everyone else pays 5%. So I expect about another 50% dilution going forward from here.
CF/diluted share = $143.94mm/300mm shares =
.48/diluted share. A 4x multiple gets you to a $1.91 target.
What will the price be prior to the mines opening? A volatile mess in my opinion. This company is a traders vehicle with a sh@tload of warrants outstanding. With all the trading I see in ABI I doubt that greed will let this name anywhere near that target before the CF is on the balance sheet. Every time this moves up you get some short-sighted players dump shares to lock in their 2-3 cent gains. How can you go up substantially in that scenario? Investors allow the SP of a company to rise. Traders just move it sideways over time.
That’s why this is one of the cheapest Ag or Zn names out there on the market. It’s a weak shareholder base with a very-short timeframe and ABI is liquid enough to get in and out of easily.
They need to do a much better job of getting their story and the quality of their assets out to the markets. Can’t invest in a company if you don’t know it exists.