re: $27 share price in 24 months?I have found two weaknesses in my projection for First Majestic's future stock price; one of them is mildly negative and the other is very positive. Perhaps one more or less offsets the other. I haven't yet recalculated a price projection based on this new information:
1. I have not taken into account the affect of warrants and options on the company's shares outstanding. It is likely that most or all warrants and options will be exercised. This will give the company cash so that they don't necessarily have to issue shares for capital expenses. But it also increases the stock outstanding (dilution) that has to be taken into account.
2. I have not taken into account the affect of an increase in silver resources on a future valuation of the company. Just as the company is shooting for 2008 silver production at 400% of its 2006 production, so also is the company shooting for expanding its confirmed silver resources by a similar 400% (or possibly 500%).
As of 12/31/06 the company has reported a resource of 59M ounces. It looks like the target is 200M ounces by the end of 2007 and 250-300M ounces by end of 2008. 250M would be a 423% increase, and 300M would be a 508% increase. I haven't actually seen or heard the higher-end 300M number; however, I am extrapolating from the information I have gathered. I figure that by end of 2008, A) there will be further resources reported for the La Parilla mine as compared to 2007, B) there will be a resource reported and later expanded for La Encantada, C) an acquisition is likely to bring with it a confirmed resource, and the opportunity to expand that resource with drilling. First Majestic has a whopping 14 drill rigs working on resource expansion on its properties, so its admittedly ambitious goals seem achievable. If and when these goals are achieved I believe that shareholders will be rewarded.