TSXV:AUN.H - Post by User
Comment by
otcmoonboundon Oct 26, 2007 11:23am
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Post# 13696862
RE: One or two other things...
RE: One or two other things...Benton,
I appreciate all your contributions here but I gotta disagree with some of your definitions.
Acquisitions of property, plant or equipment do not hit earnings up front. They are capitalized and then amortized or depreciated over the useful life. Most investors focus on operating cash flow which is the cash flow generated by operations. A good proxy for operating cash flow is EBITDA (Earnings before interest, taxes, depreciation, amortization). Cash spent on capital investments is excluded. EBITDA is compared to enterprise value (EV=market value of stock + debt - cash on balance sheet). EV/EBITDA is the key metric.
Profit at La Negra will be less than cash flow because of the amorization of acquisition costs and depreciation of plant and equipment.
If operating cash flow is only $20 million, that is a huge disappointment imo. I think everyone was expecting 30-50 million. A property with a mine life of 5 years should trade at much less than 7.5x. I think 3x is about right, and I guess that's what the market is saying. Of course, we still have the potential for an increase in resource at La Negra and Rosario and I will stay long on that basis.
The bottom line imo is we're at 87c because the market was expecting much higher production and cash flow.