RE:Production resultsgoldens wrote
Nice results. Based on costs they are walking away with just under $40million. Wish they would post all in costs after DET. If you guess at an all in cost of $2.70/lb that still leaves them with $27million. Looking forward to August report.
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In the second quarter they recieved $4.44 per pound for their copper. According to their presentation at $4.40 copper they would have EBITDA of aprox. $70 million US per year. From that we have to subtract the interest on their new $35 million US loan. Lets allow 7% for that which equals aprox. $2.5 million US per year. That leaves aprox. $67.5 million US left after interest payments.
In the first quarter they payed $4.2 million US in income tax with copper at $4.08 With copper now higher they would likely pay around $5 million US per quarter or $20 million US annually in income tax leaving aprox. $47.5 million US per year in free cashflow. That equals aprox. $60 million Cdn. in Free cashflow for ARG every year. The current market cap of the company is aprox. $220 million Cdn. At 8 times cashflow we should have a shareprice of aprox. $2.70 Cdn.
From the $47.5 million US in Free cashflow they have to deduct $7 million US in loan repayments over the next 5 years. That would leave aprox. $40.5 million US or aprox. $51 million Cdn. in Free cashflow. ARG could start paying a 12 cent annual dividend an aprox. 10% yield at todays shareprice and still keep aprox. $29 million Cdn. in Free cashflow for the company every year.
ARG now has $53 million US in cash and $35 million US in bank debt. They could pay the 10% dividend going forward and pay off the new $35 million US loan in the next 18 months from cashflow without touching their $53 million US cash pile. So basically 1.5 years from now if copper prices stay in this range ARG would be debt free with $53 million US cash in the bank and having Free cashflow of aprox. $63 million Cdn. or aprox. 35 cents Cdn. per share per year.
Its looking really good.