Capstone Mining - A Steal? Quick Numbers
A little basic analysis I did on Capstone Mining (http://www.capstonemining.com) - CS on TSX:
Capstone is now in production as of July – slightly ahead of schedule I believe. Cozamin is a copper, zinc, silver and lead mine.
July produced 57% of current targeted throughput of 1,000 tpd.
August target is to achieve 80% of targeted throughput.
Average grades 1.2% copper, 0.6% lead, 1.6% zinc and 62.0 g/t silver. 23,500 ounces of silver were produced in July.
Resources (measured & indicated):
152 million pounds copper
7.58 million ounces silver
Inferred:
152 million pounds copper
7.86 million ounces silver
Estimated average annual metal production is 16 million lbs of copper, 700,000 oz of silver and 4 million lbs of zinc at 1,000 tonnes per day.
80.8 million shares outstanding
all US$
Net Operating Cost = $36.92/mt ore Cu (Mining $14.18, Milling $15.54, G&A $3.08, Smelt/Refine $17.38, By product (Ag, Zn, Pb) credit (-$13.26)
Revenue (one year of 1,000 tpd production rate which should be achieved in Sept/06) assuming current prices:
=16 million lbs copper x $3.42/lb
= $54.72 million – costs (350,000 tonnesx $36.92 milled tonne)
= $54.72 million - $12.9 million
=$41.79 million
BUT, they are ramping up to achieve 2,000 tpd in 07.
$80 million Revenue
My numbers seem to be a little low compared to Robert Cohen from Dynamic. The PM fund manager I respect the most – his record is stellar. He says $50 million and $100 million.
At $42 million US, 80.8 million shares outstanding = 52 cents per share
Current price US$, $1.40/share, yields a P/E of 2.69.
According to Robert Cohen on his RobTV appearance, this company should be trading at at least $4.00/share – according my simple calcs that would put it at a P/E of 7.7.
Of course, it is even better than this because once they achieve 2,000 tpd the bottom line conservatively doubles (expenses don't double, so this is conservative). That is $1.04 per share with a stock price of $1.40 per share US.
They have no debt and a good amount of cash. I expect Capstone to be trading several times higher next year assuming it trades at a reasonable P/E once 2,000 tpd is achieved. Disclosure – I have shares in this stock. This is a company who has the resources, has executed the plan and has stayed well below the radar screen. No analyst on the street covers them. I love a story like this.
-JB |
