Some comments on Impact Silver (V.IPT)... I just posted the same commentary on CDs thread, and I know many of the same people participate here, so please forgive the long post, but here is some weekend reading:
I see some grumbling on a few forums about IPT and the fact that it is not performing as some had hoped. First off, lets take a look at that. I was posting about the company here and on other forums 2 years ago, when the stock was trading at 30 cents. It is now above $1.90, so the average gains work out to about 300% per year (I am not sure what the compounded rate is but probably in the order of 200%). On top of that, there is a greater amount of volatility in the stock, so there were lots of chances to add cheap shares on the way up and build a more leveraged position with a lower average cost. So I do not know what parameters the complainers are using, because in my books triple digit gains are pretty respectable.
Looking forward, it is important to consider what IPT has accomplished. A stock will trade tomorrow, not on what they traded at yesterday, but on what the market believes the company will achieve tomorrow. So a company that is undervalued today is the kind of play that investors should look for. Unfortunatley, most people prefer to chase the overvalued stories that were big winners yesterday, and that usually does not end well. All money flow is competitive. Investors that buy into stock XYZ will have less money to put into ABC. So it should be the stock that has the greatest potential for tomorrow that will attract the most money flow, and new money flow into a story is what makes a stock go up.
I will not break down the entire story for why IPT has a strong tomorrow. Just consider they own a mill, and two producing mines, on a 125 square kilometer property that is 100% controlled. Management has completely refurbished the entire operation, retrained staff to standards compliant with the BC handbook of mines, and completed development work to allow for a rapidly expanding scope of operations. The company will be in position to increase production, and the cost structure will drop. And they are already profitable now, so that profit can be expected to grow.
IPT is also a discovery story, since the total part of the project that is in operation now is just a tiny fraction of the potential for the property they control. There are over 100 past producing mines and historic workings on the property, and almost no modern exploration has been applied.
And IPT has grown to build a new core area of operations in Zacatecas, where they now control a second modern mill, and 7 exploration properties. They have a JV deal with YLL for 4 of those properties, that has netted IPT a cash payment, and they are carried as the operator of the exploration but will not have to contribute to the exploration costs.
As for the balance sheet, the company has millions of dollars in the bank, and no debt. The financial strength continues to grow with every quarter.
All of that sounds great, and people should be flocking into the stock, but it has been rather sedate lately in the trading. Now from where I come from, that makes company the buy of the century. To be able to buy quality, and a potential market leader, without having to pay a premium, should be the objective of every serious investor. I have not been a buyer lately because I was aggressive to add to my position all the way up, and in fact I exercised warrants last month for another 15,000 shares and have not sold one of them. But the case remains that IPT is a first class company that is largely overlooked.
The final point that I want to make should get the attention of every precious metals investor. We all make the mistake of projecting linear assumptions on the future value of a company, based on what happened yesterday. So for example, if IPT grew at a 300% rate during the last 2 years, few will assume that it can grow at anything more than that in the future. However, IPT is a primary silver producer. And the silver price itself is usually projected to grow in a linear progression.
I think silver is going to begin growing exponentially. I do not know if that will happen this year, or next year, or whenever. But I think that it will happen. I think silver will not just go to $15 or $18, but to $40 or $50 in the years ahead.
IPT has done all the hard work necessary to become immensely successful if silver does follow that path. They control the property that has huge silver resources, and will be able to grow from internally generated cash flow. They do not need to attract a partner, or raise more money, or wait for consultants to crank out feasibility studies. They can just carry on as they are doing, outlining new resources, growing the production and revenue at a sustainable pace, and acquiring new projects where and when they become available.
As silver prices rise, IPT could easily achieve parabollic growth rates itself. The share structure is tight, and since they will not have to raise a lot of cash going forward, it will remain tight. The share price could go to $5 with $15 silver, just based on internal growth and the higher revenues from that production. And at $40 silver, a junior producing over 2 million ounces a year, gold and base metals credits, should see the share price multiple go into double digits to cash flow.
IPT is one of very few juniors that has posted consecutive quarters of positive earnings. I think that is just the start. I have been posting about the company for years, and plan to continue to enjoy my retirement, knowing that my nest egg is in good hands by keeping a large percentage of my PF in the stock.
cheers!
COACH247
Voluntary disclosure: I have never receieved any form of compensation from IPT to discuss the company. The company is not currently a sponsor of my website. I am not a registered investment advisor so please consider this piece to be my opinion and do your own DD. |
