I have done some initial numbers. I am not fussed too much on nameplate. TGS is predicting cost of production at between 40-50 cents per pound. I am added another 25 cents for our mates at head office. drilling has stopped and now all we have to do is convert the stockpiles for 2 years:
HMS - last quarter $5.6mill in profits
SXEW (from nameplate) $30.8 mill in profits (80 cent total cost per pound)
Interest on 75 mill -$1.03mill
Net income $35.3mill
Tax (worse case -$10.6
-without depreciation)
Net profit per quarter $24.779 profit
Now with a debt of only $158million after acquisition of 40% delivering nearly $100mill p.a. looks to me a limited risk. I understand there will be some timing issues with debt rollover but this thing is a cash cow. If the 40% doesn't come off, they will pay off all debt by mid next year plus will have $25 mill in the back plus the additional $65 mill to do next stage.
TGS Price at posting:
24.7¢ Sentiment: Buy Disclosure: Held
