One Possible SolutionUnlike the vast majority of metal mining companies that have to contend with the irrationality of the current market, Mercator Minerals can bail itself out of the current madness. While it will take a little more patience to get there, the annualized cash flow from full production will be somewhere near $350 million.
When the cash starts rolling in, let’s say ML purchases 30 million shares at a 40% premium to the current price of its stock, and spends $270 million to do so. The result of that would leave about 48 million shares outstanding. That’s where things start to get interesting.
The next subsequent year’s earnings would then be denominated by a much smaller number of shares outstanding, so ML could then earn something like $7.00 per share. Let’s also then further assume that the market decides to reward ML with a generous multiple—perhaps, three times earnings.
(Just a side though here. I know full well that the Western Civilization will probably have ceased to exist by that time—since that what the market is currently discounting. As such, the norm PE ratio for base metal companies will most likely be one times earning. But ML seems to have its act together. They could probably muster a PE ratio of three. That would get the stock price up to $21.)
So, even if mass hysteria prevails for an extended period of time, ML can see their way through. Oh yes, a special thanks to Jims101 for planting the idea of a share buyback.