RE: Change of Sentiment on IverniaSinan199,
Nice analysis and as is the proper spirit on these Bulletin boards I agree with some of your reasoning and disagree with other parts. For the benefit of colleague BB posters here I add the following from my perspective:
1. You wrote "The most disturbing new fact to me is that Ivernia is no longer the lowest cost producer of this commodity and after all lead is a commodity so it is cyclical. So, Ivernia has lost the greatest moat of any company in the commodity business".
I respectfully disagree completely with this perspective because Ivernia has never in actual performance been the lowest cost producer(or anywhere near that distinction yet!) and is in a very early stage of mine development(of a mine with great quality advantages in some of it's deposit areas). I fully agree that in the commodities business costs are a direct squeese and cost increases(which are not also encountered by competitors) are a clear warning signal of future consequences.
2. Ivernia has transformed from a development phase to a full operating basis only on October 1, 2005, with Q4, 2005 the first quarter as an operating company.
3. Production is currently at only around 60% of planned level, until the second mill is installed and commissioned in June/July timeframe...this will clearly have a major impact on production costs per pound where the "fixed element" will be spread over a different basic production volume.
4.The $0.15 production costs that you refer to was a particular situation which included proposed refining by Ivernia, where approx $0.065 was effectively cost reduction(in accounting terms) due to refining..... Ivernia has very properly posponed the refining implementation phase due to current intense competition and current worldwide reduction of refining margins.
5. For quarter 4 2006, for example, you are correct in your numbers if costs are $0.30 per pound and production annualized is at 100,000 tonnes of lead per year, but the price of lead in Q4 2006 is one of the unknowns ??..... and the cashflow/price ratio factor is another unknown. My personal expectation is that Ivernia will unfold a strategy over the next 18 months, for the use of it's very healthy cashflow(relative to it's size) and a new growth development aspect for Ivernia's business.....with impact on the cashflow/price ratio assignment by the marketplace.
6. Because of the normal manner in which companies in this business sector book revenues on shipment and adjust to actual price 3 months later, Ivernia has about $1 million additional revenues that will be adjustments in Q1, 2006 for the production shipped in Q4, 2005... works well in a rising commodity price market, but of course is a double edged sword. I anticipate cashflow up by $0.01 per share in Q1, 2006 just on this element alone, and up by a further $0.02 to $0.03 based on commodity price recorded in early months of 2006.
7. The actual average price identified by Ivernia in their SEDAR report for Q4, 2006 was $0.47 per pound.
8. I recommend that commodity price projections based on historical price patterns, while somewhat interesting, have the potential to mis-lead by missing significant major changes......your reference to Peyto is perhaps a good example of this, where North American Natural Gas, and world Oil prices, can not be wisely based on much history, as the supply demand balance has clearly changed, IMHO, under significant major shifts.
Peace,
Good Decision-making to All,
ElJ