RE:RE:RE:Supposegoldens wrote
So basically once they announce the dividend in the next 30 days then something has to give. Either we are heading north of the existing share price or they are going to be extremely cautious with the dividend and hold of on returning the 60% mentioned in the conference call until after they pay off the loan. Either way I don't see much downside here.
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One thing i have learned in the stock market over the years is that the shareprice of a certain stock does not always go where you think it should even with good news. ARGs last quarterly report is a good example as they announced that they had $53 million US in cash vs. $35 million US in debt and had just brought in $21.9 million US in cashflow in the last quarter. Very spectacular numbers for a small company like this and the shareprice went nowhere.
Announcing a dividend may help the shareprice go up as it is Cash in shareholders pockets which is what investors want. Having $53 million US in the bank does not really do anything for a shareholder but cash coming in in dividends every month or quarter does do something for investors and should help the shareprice in the short and longer term.
Many posters here keep mentioning paying off the loan. At the end of the second quarter ARG had $53 million US in cash and $35 million US in debt. In the two months since the end of the second quarter ARG should have added aprox. $9 million US to that cash pile after income taxes. That would mean they should now have aprox. $62 million US in cash and could tommorow pay off the whole $35 million US loan and still have aprox. $27 million US cash in the bank and be adding aprox. $4.5 million US to that pile each month.
From what i can see ARG never really needed the current $35 million US loan as they could have payed off all their debt from their cash hoard. It appears that for whatever reason maybe expansion plans etc. or maybe after struggling for so many years they just like the feeling of having a big bundle of cash in the bank they want to keep a good pile of cash on hand and slowly pay the debt off over the next several years. The new loan also allows them to make extra payments and i would not be surprised to see them pay back more every year than the minimum.
In any case debt is no longer a problem for this company and unless they do something really stupid it should never be a problem again. In looking at their presentation ARG has invested aprox. $300 million US since 2003 or around $375 million Cdn. The market cap. of the company is currently around. $ 250 million Cdn. Subtract the aprox. $27 million US or aprox. $34 million Cdn. they currently have in cash more than debt and we have an aprox. market cap. minus net cash of aprox. $216 million Cdn. for a company with $375 million Cdn. in assets.
Anyone buying shares today is paying aprox. 60% of the cost of the assets in a Copper bull market with high copper prices which are expected to rise in the future.
Put another way each $1.30 ARG share at current copper prices is Free cashflowing aprox. 32 cents per year or around 25% cashflow to shareprice.
As we all know there are no guarantees in the market but ARG has more than the vast majority of stocks that i know all the signs of a company that should end up making shareholders a lot of money in both capital gains and dividends in the future.
And the best part is it should all start happening in the next month.