Future Options for Abcourt Management The gold trend remains positive for Abcourt Mines.
In this new higher gold price environment, the continuity of the quantity of Elder mineralization, presently being mined, bodes well for the future capital requirements of the company.
Let's assume that the cash flow from the Elder mine will provide all the capital funding requirements for both the Elder and Sleeping Giant mines.
Then the revenue stream from a fully operational Sleeping Giant mine would represent, free cash flow.
Then Abcourt management would be faced with a cash disposition issue. What should they do with all that money?
It needs to be spent. Otherwise, the government will heavily tax the earnings.
1. Abcourt could distribute the revenue in the form of dividends and let shareholders carry all the additional tax burden.
2. Since Abcourt Mines is potentially in a high growth situation, the company might instead divert these funds towards the gradual start-up of the Abcourt-Barvue mine which needs the additional funding.
3. Or the company could maintain its focus on the gold side of its business for the forseeable future. They might continue to explore the potential of a mine at the Discovery/Flordin property. A supplemental source of mineralized ore would be a valuable secondary asset. The need for a temporary mine shut down, need never again, negatively impact, the company's financial statements.
4. The company could look for astute property acquisitions; finding value because they have the cash that others companies, need to have.
So would Abcourt shareholders want a company focused on growth or a company that represents a value play?
What would management want to do? They are high stake shareholders too! Everyone would want the best rate of return.
If the potential dividend was delayed, would it be possible for the company to become a value play within a growth scenario? Three or four active mines and two active mills would provide a lot of income. Later a good paying dividend could become a better draw for future income oriented investors.
And does anyone really know how high this gold price will rise? It also takes time for it to move!
Also, mines operate using a depleting resource. Eventually, they lose their value as their existing resources start to diminish. That would impact negatively on the company's share price. These kind of ore bodies eventually need to be replaced.
At some point down the road, perhaps a year from now, some important decisions will need to be made.
It will be good, to have, so many options.
All the best! Java