Production Life - Analysis Assistance, page-2

Why do you think it'll be patchy?

My calculations are: 100000 ounces per month of silver * $4 of profit = $4.8m cash-flow per year. Mt.Boppy proceeds will go to pay off the debt. There will be significant revenue from that but I discounted it to zero.

Current market cap $16m. It is valued at 3.5x estimated cash-flow, which is less than my 4x hurdle for investment. My July 2016 target price is 8x cash-flow. This will happen once the 100,000 ounce production per month is sustained, and costs are maintained at less than $18, giving the market more confidence.

By comparison, NST in Nov-Jan had $200m annual cash-flow, and was valued at $700m. It is currently valued at $1.28b, hitting my target early. (I currently still hold NST)

Compare my figures to:

Company target figures over 1 year from July:
200,000 ounce silver per month
$22 silver price - $16 estimated silver mining cost = $6 profit per ounce
$6 * 200000 * 12 = $14.4m profit.

(2800-1500 loan payment) = 1300 ounce gold per month
$1500 gold price - $1000 estimated gold mining cost = $500 profit per ounce
$500 * 1300 * 12 = $7.8m profit

Company figures imply a $22.2m profit by July 2016, a forward earnings ratio of 0.72.

I don't think this stock is particularly distressed. The cash-flow isn't even proven like NST's was a few months ago - I would still rate NST in November as a better buy. Investing right now means you're taking the risk of the company ramping up silver production. That's the catch, but as you say, BOK are proven operators.