Amerigo Resources Ltd T.ARG

RE:RE:RE:RE:RE:Adding more

[savyinvestor333]

So how am I quite wrong?  Maybe you are as here is a quote from the transcript  on taxes paid in the first quarter. That's U.S dollars also not Canadian so full year taxes will be alot more than 10 million.

In Q1 2021, the company recognized an income tax expense of $4.3 million and a net income of $10.9 million, compared to an income tax recovery of $3.7 million and a net loss of $4 million in the first quarter of 2020.

sclarda wrote: savyinvestor333 wrote

We have to remember cashflow is not earnings, once we remove all costs the earnings will be alot less than $80 million I don't think trading at 10 times cashflow is realistic.  We will probably have a hard time getting to 10 times earnings. CIA which is an iron ore producer is trading at 6 times current year earnings and doubling production right now. From the Amerigo website presentation EBIDA will be $61 million U.S. at $4 dollar copper and $71 million U.S. at $4.40 copper. That said I do think we are greatly undervalued here.

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sclarda wrote: microcaphobby wrote

smart move. The 2nd q numbers will be solid and this dip in Copper is going to be short-lived. Nothing Chinese can do about the copper price, in the long term. 

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At the end of the second quarter which is aprox. 10 days away ARG should have around $10 million US more in cash than total debt.  At the end of the first quarter their DET royalties and payables were aprox.  $8 million US more than recievables and inventory so by the end of June they will have enough cash to pay off all their debt and other bills. 

At todays copper price they will be generating aprox.  $80 million CDN. per year in cashflow going forward.  ARGs market cap. today is aprox. $ 220 Million CDN. At 10 times cashflow this would  equal  a $4.50 CDN. shareprice for ARG.  They could pay out a dividend or 24 cents per share per year which would equal a yield of aprox.  20% at todays shareprice while still keeping aprox.  $35 million CDN per year in cashflow to grow the company. 

It has been a long struggle for ARG and its shareholders. The increase in copper prices came at a perfect time for this company as they have done their capex and are now a larger producer with more cash than debt and will soon be piling up cash all over the place.

The market hasnt noticed this yet but i am betting that it soon will and although i am holding quite a bit of this stock already i bought some more today as this company is now at the verge of being a debt free, free cashflow generating machine.

And isnt what every investor is looking for?

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We have to remember that you are quite wrong.

In the case of ARG once the debt is gone cashflow will be all earnings except for income taxes which they must be paying already although it may increase with higher income.

Everything depends on the copper price. If copper were to average $4.50 ARG would be cashflowing aprox. $90 million CDN.  Allowing $10 million for income taxes and that gets us to $80 million CDN, Free Cashflow. 

At $80 million in Free Cashflow  or even $70 million with NO Debt  ARG with a current market cap. of aprox. $220 million is a steal at the current shareprice.

End of story.