As a recent shareholder and follower of CMM I very much enjoy most of the chat that I read and find it both entertaining and sometimes informative. As a C.A.
Firstly lets take off the table the macro items such as a major retreat or growth spurt in the markets in general, large changes in the US, Canadian dollar exchange rate etc etc. Assuming the big picture items, which can and do effect the share prices of all stocks albeit sometimes differently, remain the same we also need to assume that grades and recovery rates too are not negatively effected by actual rates. Having stated some caveats I do believe that some writers are in danger of doing exactly what management has frequently been accused of in recent months and that is of being “over optimistic”. By setting the bar too high and creating the expectancy regarding the financials for 2011 i.e. the short term outlook we are not doing ourselves any favors.
Let’s look at another set of forecasts and assumptions. If we assume; the Lamaque revenues start in the second quarter, say 52,500 ozs for the remainder of the year, and Sao Juan 20,000 ozs and gold prices average $1,250 in 2011 gross revenues would come in at $90.6m. I’m not sure I understand fully the impacts of the Deutschbank arrangement but believe that CMM gets $561 plus US$88 revenue for each ounce and is obliged to deliver 8004 ounces in 2011. If this is correct then gross revenues would have to be adjusted downwards by $4.8m bringing them down to $85.8. Assuming a cost per ounce at Lamaque at say $700 for 2011 and $600 for Sao Juan then the gross profit would be $28.875m for Lamaque and $13m for Sao Juan before the Deutschbank adjustment.
The next big unknown is what will the corporate admin, deprecation and other overhead costs be. I note they jumped considerably in this last quarter. I’ve assumed $4 million a quarter as depreciation must be considerably higher after all the equipment purchases and improvements to the Lamaque mine. Take this $16 million off the gross profit and you have a pretax profit of $21.1m. Without any income tax on this profit, since I have no idea what any accumulated brought forward losses may be, and assuming warrants and options are all exercised based on 443m shares the FDEPS comes out at
4.8 cents a share or half of BullionBull’s forecast.
One should also bear in mind that if Lamaque’s production is only treated as revenue from the second quarter that we may not have a good idea of how things are shaping up until the second quarter’s numbers are released around August 2011.
Does anyone have a good hold on a p/e ratio of a company(s) that is a year or two ahead of C.M.M.?
This is just one more perspective which hopefully adds something to the communal pot.
Hopefully my lesser expectations will be exceeded and I too will not be disappointed. 2012 in turn will produce undoubtedly even better EPS. I am certainly looking at a 2 year horizon at this stage which I will modify as things unfold. My advice is that we should all treat ourselves to a dose of patience this Christmas. Oh and a very Happy one to all. Off to the beach now…
