Amerigo Resources Ltd T.ARG

RE:RE:RE:Production results

[Joe455]

savyinvestor333 wrote: Not to be argumentitive but here is the wording from the last quarters release.

Amerigo posted net income of $10.9 million, earnings per share (“EPS”) of $0.06, EBITDA 1 of $23.3 million and quarterly operating cash flow before changes in working capital of $20.0 million.   As you can see all that cashflow does not transfer to earnings and now they are fully taxable. Also the "D" as in depreciation also comes into account.

I will be happy if we can get to 6-8 times this years earnings in the near term which I think could be around $.24 U.S. as they have told us the first 6 months would be better production than the last six due to maintenance.so that should equate to a Canadian share price of  between $1.80 to $2.40 plus a dividend to boot.  Anyway I think we can agree we are way undervalued at this point.

sclarda wrote: goldens 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.
 

Way more upside than dowside at these price levels.