Firecracker--there you go again...You said:
"SST now has more than 120M fully diluted shares and $25M in debt after its latest deal. If SST gets 3M ounces of silver in 2009 they would make about $27M less $2M in interest or about $25M or about .20 per share with $13 silver."
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A few things... First, you counted all the fully diluted shares into your EPS calculation, without including benefit of the cash that would come into SST coffers from exercising the remaining warrants and options. If you did that, you'd have to add (guess what!) roughly $US25mm in cash--ERASING the debt incurred for the Lundin transaction.
Second, here's another way to look at the Lundin deal. SST had 102mm FD shares before the transaction, and about 123mm FD, afterward. For this, they purchsed silver production that TRIPLES their silver stream in two years. In other words, for roughly a 20% increase in fully diluted shares they garnered a 200% increase in silver production. You--who constantly beats the dilution drum--has to like that.
Now, I realize that the next deal won't have the benefit of prior warrants to bring cash into the till. But the cash flow that is and will accrue to SST from 3 million ounces of debt-free production will instead provide cash for deals, reducing dilution in making further deals.
Last, and certainly not least, I'm not sure I'd invest in SST if I believed silver would stay at US$13. If you want to talk about dilution, look at the way EVERY SINGLE COUNTRY IN THE WORLD is printing currency and diluting the value of their "money." There has never been a single, fiat currency--unbacked by a monetary commodity (such as gold or silver)--in recorded history that has retained it's value. ALL of them--each and every one--have come to naught. ALL governments eventually debase their currency to nil. And, now, they're engaging in a RACE to the bottom; engaging in "competitive devaluations." For this reason alone, silver will continue to "increase" in value over time.
But the fundamentals for silver are stunningly good, too. For roughly a century, the US government has been dishoarding silver, even as silver's industrial uses grew. Now, that hoard is gone, and silver's been in deficit for about two decades now. The immutable laws of supply and demand can be perverted for shorter periods of time, but in the long run--the market will out. How high will silver go? I don't know, but I believe it's far more likely to be higher than exactly the same in two years.
If SST and silver do NOTHING for two years, at that time SST will earn $9 on each of 3 million ounces of production--or, US$27mm. If they have a 30% tax rate, the net come down to about US$19mm in earnings. Divided by, say, 125mm FD shares, creates net profits of about $0.15 per share. At Silver Wheaton's P/E multiple (~30), that a US$ share price of about $4.50.
Let's instead say silver goes to $25 in two years, but SST adds no further silver streams. 3mm ounces of silver production creates US$63mm in gross profit; about $44mm after tax (at 30% tax rate). That's earning of about US$0.35 per share. A P/E of 30 on that, gets a share price of US$10.50.
Let's further say that silver continues it's inexorable rise, and SST continues to build it's silver revenues, at a conservative rate of 4mm per year. That'd result in roughly 11mm ounces production in two years, at $25 silver. $21 gross profit per ounce, times 11 million ounces, equals US$231mm gross profit. At a 30% tax rate, that's a net profit of US$162mm. Let's divide that by 200mm FD (even though such small deals would mean a minimum--if ANY--dilution. That's US$0.81 per share, net profit. A P/E of 30 means that SST would have a US$ share price of $24--a 10-bagger from here.
All projections into the future necessitate assumptions. Maybe I'm off on my silver price assumption (maybe it's too low!); maybe I'm off on SST's growth assumption (again, maybe it's too low); and, maybe they have to pay more than $3.90 or $4.00 per ounce in future deals. Maybe they dilute more (or, maybe less!) Who knows? In order to evaluate any investment, though, you have to project some assumptions into the future.
IMNSVHO, the WORST case scenario is that both SST and the POS do nothing more over two years, and the P/E isn't 30, but 15. That produces a share price of about where we are now, around US$2.25.
The BEST case, conversely, could be staggering. I'll bet SST could build silver production to 20mm ounces in two years, if they really stretched. If they do that, and silver's at $25, that's gross profit of US$380mm. After 30% tax, that's net profit of $266mm. And, let's say they only double the number of shares outstanding, because cash flow is so strong from a rising silver price and increased production, resulting in ~250mm FD shares outstanding. $266mm divided by 250mm shares is net profit of $1.06 per share. Multiply that by a P/E of 30, and the share price is US$32. That's a 15-bagger in two years.
Pick your assumptions and DYODD. But, I like this investment. A worst case scenario is that the price barely moves in two years, but has downside protection from already acquired production. A best case scenario is a 15 bagger or more. The reality may be somewhere in the middle. However, I like that middle!
Sorry for the long post, and please excuse any typos. I apparently had to hammer it out for myself to really understand what is possible with SST.
Good luck to all!