Teal Valley T.TV

My analysis for the next 12 months

[LuvtoInvest]

Facts:

1. TSX price of CAD 1.65/share equals USD 1.30/share
2. Hedging in Q4 2021: 16.12 Mlbs @ $1.25/lb and 19.80 Mlbs @ $1.23/lb (refer October 2021 Corporate Presentation)
3. Hedging for Q1 to Q4 2022: 16.12 Mlbs/quarter @ $1.25/lb (refer October 2021 Corporate Presentation)

What TV Management has said:

1. Sale of Santander will be closed in Q4 2021. Implication for Q4 2021 results is a loss on sale of Santander assets.
2. Annual Production will be at the lower end of the target and annual AISC will be at the higher end of the target

My Assumptions:

1. Q4 2021 - Zn: $1.52/lb; Pb: $1.06/lb; Ag: $23.5/oz
2. Q1 to Q3 2022 - Zn: $1.50/lb; Pb: $1.05/lb; Ag: $24.0/oz
3. 50% of FG inventory build-up in Q3 2021 will be shipped in Q4 2021 alongwith Q4 2022 production
4. Zinc payable production and sales during Q1 to Q3 2022 will be 78.5 Mlbs/quarter (For the sake of simplicity, I am assuming sales volumes equal to production volumes every quarter, though I am aware that this will not be true. However, fine tuning for this analysis is not required)

My Analysis with the above backdrop:

1. Q4 2021 - Revenue: USD 122 million; Net Income (without taking into consideration losses on sale of Santander assets): USD 21.7 million; Earnings/Share attributable to Shareholders of TV: USD 0.20/share
2. Q1 to Q3 2022 - Revenue: USD 102 million/quarter; Net Income: USD 28.0 million/quarter (This may seem a little odd but Santander was making losses and its disposal is going to reduce volumes but increase net income); Earnings/Share attributable to Shareholders of TV: USD 0.25/share/quarter
3. Earnings/Share attributable to Shareholders of TV for 12 months (October 2021 to September 2022) - USD 0.95
4. Forward P/e - USD 1.30/USD 0.95 = 1.37

Final Comments:

1. The share price may not move upward after Q4 2021 results are announced because the actual results may show a net loss due to losses on sale of Santander assets. I wish the company revaluates its assets at the remaining three mines and writes back some of the previous impairment losses. If the company does this and the write back offsets the loss incurred on sale of Santander assets, this will have a positive impact on share  price.
2. However, with a forward P/e of 1.37 as on date, this stock could be a 5-bagger by the time results for Q3 2022 are declared.

IMHO. Please do your own due diligence.