OK, so I'm going to describe why I think this stock is a gem for a long term hold. But happy to hear counter arguments in case there is something I'm missing.
So there are only 2 scenarios approaching very soon, possibly within the next few weeks. Firstly, the company is full of shit and are not about to start production (unlikely IMO). Secondly, we have a trading halt, and an announcement to say they are indeed on track to producing 200,000 ounces of silver or more per month starting immediately.
The market cap currently sits at only $16 million. The bottom of the silver market appears to be around this $15 US mark and the Aussie dollar should deteriorate throughout this year to ensure a decent profit margin, and a high probability that the bottom for AUD silver at $18 in November will not be seen again.
Lets say their profit is $2-$4 per ounce of silver at todays $20 mark. At 200,000 ounces per month thats $400k to $800k profit per month (!), at what is potentially a low for AUD silver. That's annual earnings on the silver alone at $4.8 million on the lower end, and $9.6 million on the higher end. That would be a forward p/e between 3.3 and 1.6 (!) making it incredibly undervalued.
What could blow out though, is if we see further rate cuts by the RBA before end of year and a silver price around $23 AUD or higher, forward p/e shrinks even more.
Whats more is the silver being process in 6 months should increase to 350k ounces with stockpiles of 50g/tonne to be processed and manuka being able to produce 2 million ounces per year onwards.
Later this year income from the silver will be used to start production in the following gold mines:
'Mt Boppy ore is forecast to produce approximately 67,000 ounces of gold over a two-year period from Q3-2015'
'The Marda project is located 400 kilometres north east of Perth in Western Australia. The project has a resource of 495,000 ounces of gold at a grade of 1.9 g/t, and a reserve of 176,000 ounces of gold at 2.3 g/t.'
It seems undervalued based on the silver production alone. If we see the next announcement state that they are on track for the 200k ounces, then we should see a rerate.
DYOR and let me know your thoughts people.
BOK Price at posting:
35.5¢ Sentiment: Buy Disclosure: Held
