RE:RE:q price adj and moregoldens wrote
So you say the all in costs are firmly above market prices? Can you please post those calculations.
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In the second quarter of this year ARGs cash cost was $2.01 per pound. They produced just under 15 million pounds of copper in the quarter. DET royalties were aprox. $18.3 million for the quarter or aprox. $1.20 per pound of copper produced. Those royalties were calculated at the provisional price for the second quarter of $4.10. Now that copper is at $3.40 those royalties should drop also. I would guess that they would now be aprox. $15 million or less per quarter at current copper prices. Add the $2.01 cash cost and the aprox. $1 per pound in royalties and you have a total cost of aprox. $3.00 per pound. Then you have to add in other costs like interest on the loans etc which thankfully on ARGs very small debt is not much. From the numbers i come up with the all in cost at current copper prices is likely around $3.10 per pound.
At a total cost of $3.00 per pound before interest costs etc. ARG should be making aprox. 40 cents per pound in EBITDA at the current copper price of $3.40 Multiply that by 60 million pounds per year and that equals an EBITDA of aprox. $24 million. In looking at their presentation they state that at $3.40 copper their EBITDA will be aprox. $26 million so my estimates appear to be close to theirs. Interest on their loan of aprox. $27 million should be aprox. $1.8 million per year. Then there are other costs such as income taxes etc. which should not be very high at lower copper prices.
Basically a 12 cent annual dividend on 166 million shares will cost the company aprox. $20 million CDN. per year which should be around what ARG is currently bringing in at current copper prices. Then there is the principal payments they have to make. They could take money from their cash pile to pay the principal payments.
I would not be surprised to see the dividend cut back to 8 cents per year or possibly even lower if copper prices stay around these levels. One thing i just noticed in their presentation that i hadnt seen before is that they state that average copper prices of $3.80 guarantee regular quarterly dividends.
Everything depends on where copper prices go. 50 cents lower and ARG is Fu#cked along with most other copper producers. 50 cents higher and we are riding high again.
Isnt investing fun.