no it isn't. but this is definitely a good buy point imo, if one has been considering buying it.
btw, GOLD reported RECORD earnings, up 38% net, with almost all operations substantially reducing costs.
DROOY also had a quite good report...
and i have heard by way of rumor that Harmony's will be quite impressive too.
now imagine for a moment that gold prices rise...you're looking at cash cows.
in '93 i held an SA mining stock, the assets of which have been bought by DROOY in the meantime, ConsMining. i bought it in late '92 at 4 SA cents per share, and it traded a bit later actually as low as 2 cents, at which point i bought another load. by the end of the second quarter of '93, the stock was trading at 44 cents, but more importantly, had already paid out 2 cents per share in dividends, equal to the price per share about half a year earlier!
i believe in a gold bull market, buyers of e.g. DROOY or similarly low priced gold stocks at current levels, may very well also recoup their entire purchase price in the form of dividends within a year or two, and thus own their shares for free.
let me give an example, using data and information from DROOY's latest earnings release and conference call: currently, the co. produces about 1,1m. oz. at a cash operating cost of $224/oz. per year.
it's milling capacity is 2,3m. tons of ore per year, of which only 1,9m. are currently used, and only 300K of those are underground ore (which is higher grade) while the rest is sands and slimes treatment.
the co. reckons that if the PoG were to improve, it could boost the underground ore contribution to 37% of capacity from the current 13%, with only minimal capex, thereby almost DOUBLING production to 2,1m. oz. per year within months of the decision to ramp.
1m. oz. more, at say a gold price $80 above today's, means net profits would improve by about 600% from this production ramp alone. add to that the profit which would be made from the base production, and you arrive at net profits outpacing the current market cap of the stock by about 60 million bucks. admittedly this is only a rough calculation off the top of my head...the actual figures may be slightly better or worse...in any case, if DROOY were to follow in the footsteps of its SA brethren, and decide that it will begin to pay out 50% of its net profits as dividends, you'd have your purchase price back quickly in this scenario...two years tops.
happened btw. in the '78-'80 bull too - at the beginning, DROOY was trading at 2 bucks. when it ended, it was trading at 52 bucks, and had paid out approx. $2,50 in divvies. |
