RE:ARG Thanks for those figures.I would like to see no debt at all before proposing a dividend but either way it bodes well for share price appreciation.
sclarda wrote:
At the end of last year they had $46.5 million US in bank debt. In the first quarter they paid off $6.5 million US. Debt now stands at $40 million US and cash at the end of the first quarter is now $38.4 million US By the middle of April a day away they will have made another $2.5 million US in cashflow and cash will be $ 40.9 million US. OF course they still have to sell and get payed for the copper but as i write this ARG has more cash than bank debt. They also have a $7.3 million US loan from Codelco to finance settlement adjustments.
Bank debt and the Codelco loan total aprox. $47.3 million US. If copper stays around $4 they are cashflowing aprox. $5 million US per month. By the end of May they should have aprox. $48.4 million US in cash. Basically six weeks from now ARG will have aprox. $1 million US more in cash than their total bank and Codelco loan.
Of course especially with all the cash they already have there is no big rush to wipe debt out completely. Lets say that ARG started paying a dividend of half their cashflow or aprox. $2.5 million US per month at the end of this month. That would still leave the company aprox. $2.5 million US per month of cashflow.
By the end of the year that would total $20 million US that ARG would retain after the dividend. Add that to the current $38.4 million US in cash they have and ARG would have aprox. $58.4 million US in cash by the end of this year. The total bank and Codelco debt are currently $47.3 million US. So even if ARG started paying out half their cashflow in a dividend at the end of this month and copper stays around the $4 mark they could also pay off all their total debt by the end of the year and have aprox. $10 million US in spare cash lying around with another $2.5 million US adding to the pile every month. By the end of next year even paying the dividend with half there cashflow they could have $40 million US in cash.
A dividend of $2.5 million US per month or $30 million US per year would equal aprox. $40 million CDN per year. With options there are aprox. 190 million shares issued. A 20 cent CDN dividend per year would cost aprox. $38 million CDN per year. At todays shareprice a 20 cent CDN dividend would equal a yield of over 20% while still letting ARG keep an equal amount for its own uses.
If they wanted to be conservative and play it even safer They could also pay a 10cent CDN dividend per year which is over a 10% yield at todays shareprices which would leave ARG with 75% of its cashflow and then increase it later as they increase their cash pile. Personally i could live with a 10% plus dividend which still leaves the company 75% of its cashflow forever.
The companies cashflow projections in their presentation that i am using are EBITDA. Interest payments will soon be gone so the only unknown is how much income tax they will have to pay which will reduce their income somewhat.
Either way unless we have a major collapse in copper prices this company for its size is a cashflow machine and will have more cash than total debt within six weeks. Soon shareholders should start to see the benefits in possible dividends, share buybacks and a shareprice increase.
With the current financial situation of the company i think these things may happen a lot sooner than many seem to belive and i wouldnt be surprised to hear some good news in next months quarterly report.
Good luck to all.