spoke with management todayHere are some of the notes from my discussion with management today, and my own comments:
The mill is operating at a steady rate of 1200 tpd. They have mostly been processing lower grade ore up to this point while they fine tune the operations, and even so they reported today some impressive financial numbers just on the small amount they are currently shipping.
The plan is to start running ore from level 10 of the mine, which is much higher in grade. They anticipate recovery rates of 90% for copper, 75% for silver, 65% for lead, and 60% for zinc. Those are exceptional numbers for a poly-metallic deposit.
I had fully expected a steep learning curve for management once they restarted operations, and I am pleasantly surprised at how well they quickly ramped up to significant production without any delays or hassles.
The company has more than $21 million USD in the treasury, and that will surely lower the overall risk profile. The ore they are processing is of high grade such that even if we do get a significant meltdown in metals prices, they will still be profitable.
Three drills are still turning on the property, and more results can be expected as they work to extend the strike length of the vein. Given the trend of higher grades as they step out the drilling, I think we can be optomistic that the company will be able to continue establishing a larger mineral inventory, which currently supports more than 10 years of operations. Again, that contributes to a low risk profile for investors.
There are expansion plans to build an entirely separate recovery plant with a capacity of 3,000 tpd, in addition to current operations. That will drastically increase the revenue and make the bottom line even more attractive. Even assuming a forward cash flow estimate of only 50 cents for the first full year of operation, that still works out to a multiple of only 3 times at the current share price, which is stupid cheap.
My biggest concern is of a hostile takeover bid, but since management owns about 10% of the stock, and friendly institutions control more than 50% of the float, it is unlikely that will happen. So going forward I do see a steady increase in the shareprice as the positive operating results continue to build confidence that the company is for real. In addition, I expect the bearishness in the commodity sector is drastically overdone, and it would not surprise me at all if metals hold the current price range, if not head much higher. Sooner or later the market will figure out about CS and I think a share price of $7 - $10 is coming.
Most of the outstanding warrants were cashed in this summer, so the share price has very little overhang left to hold it back once this consolidation period is over. The future looks very, very good as far as I am concerned.
cheers!
COACH247
PS: Voluntary disclosure - A large chunk of my total PF is invested in CS shares, and the company is a sponsor of my website.