RE: Q2 Will Create SparksYes, need copper to stay in the range of US$3.20-US$3.50 when ARG reports Q2.
I still disagree that Colihues is needed to get stock to $3.00.
At US$3.00/lb copper and US$25/lb. moly I get EPS of US$0.38 on fresh tailings only. With copper above US$3.00/lb. and moly now around US$32/lb., even if costs (notably electricity) are somewhat higher EPS should be US$0.40+ share.
Its actually bizarre that Colihues would have a negative option value when it should be positive. What do I mean?
Let's say Colihues didn't exist at all. That 100% of ARG's story was merely fresh tailings and growth only if El Tentiente gets expanded. What is this company worth? Its annual EPS likely to be in the range of US$0.30-US$0.40. It would have minimal CAPEX so earnings equals cash flow. And paying 30%+ of earnings in dividends, making ARG a high yielding stock. What multiple would you apply? I can see 8X to 10X as reasonable. It would generally apply a range of around US$2.75-US$3.50.
ARG would deserve a multiple higher than a copper miner. Why? There are few miners that have reserve lives anywhere close to El Teniente. Second, ARG has no reclamation costs or environmental issues other than the footprint around its plant.
So if Colihues didn't exist I can see ARG easily worth C$3.00/share.
Now bring in Colihues. The company has already spent over 80% of the capital necessary to put Colihues into production, which would double production. It hasn't gotten approval yet, but this is a free option.
If ARG doesn't get Colihues in the near-term it should be penalized beyond its "fair" share price assuming Colihues didn't even exist. However, the only thing that you are right is that the market values psychology as much as reason and logic.
To summarize, which scenario justifies a higher share price based on rational thinking:
ARG that had no Colihues
ARG with Colihues, but no approval to begin anywhere in sight.
I think the answer is obvious. The fact the market is irrational doesn't mean I have to. I guess that's also how to make money in the market...by finding the disconnect between logical reality and psychological factors and then benefitting from convergence.