RE:RE:short term the palladium price is overbought
Hi Sunshine,
Back of napkin, I would estimate Annual EPS of about $2.75 at a $1,500 USD Platinum price and $1.25 at $1,100.
A few things worth noting:
1) Last quarter there was an income tax loss carryforward recovery, which boosted earnings. I have assumed a 26% tax rate in my calculations. If PDL is able to fully utilize the $43,500,000 tax asset this year, you can add about $0.75 to both ends of my estimate, although obviously this boost to earnings is not sustainable in the long-run.
2) AISC are expected to rise ~$100 this year due to lower grade processing. Output will be down slightly.
3) A portion of the revenue is not levered to Palladium Prices, but rather gold, platinum and copper.
I went a little deeper into the financial statements than this, but you can do a quick back of the napkin calculation this way:
PoP = $1,500 USD - AISC $800 = $700 USD profit / ounce x 1.33 FX rate = $931. $931 x 230,000 ounces = $214M. Divided by 58M shares = $3.69/share. Assuming a long run tax rate of 26%, you get $2.73/share.
Nonetheless, if you believe the company will have a strong continuing production profile and the continued supply deficit sets a baseline Palladium price above $1,100, this stock still seems like really good value. Below this level the economics start to get more iffy.
I think there is some strategic element here to owning a pureplay asset in Canada, when almost all the rest of the world's production comes from Russia and South Africa.