Revised Capstone Cash Flow Analysis
After reviewing my Capstone cash flow analysis from the past weeks, I noticed I made several errors. First I didn't factor in the cost of transporting the product after it is mined and milled which more than doubles the production cost. Then I forgot to apply taxes to the earnings along with a share of profits being sent to their 10% partner.
The bad news of course is that my revised cash flow estimates will be lower than before.
However, since metals prices continue to surge to new heights every week, the impact is not that large.
Capstone is still mighty cheap and I cannot believe it is trading this low. Here are the revised numbers.
Revenue:
16,000,000 lbs copper x $3.9081= $62,529,600
4,000,000 lbs zinc x $1.7131= $6,852,400
700,000 ounces silver x $15.15= $10,605,000
Total Revenue= $79,987,000
Costs:
$9,953,000 capital cost
$72.80 (includes $40 extra for transportation etc) x 350,000 tonnes milled = $25,480,000
Earnings before taxes:
$79,987,000 - $25,480,000 = $54,507,000
Earnings after taxes (33% income tax, 8% profit sharing with employees, 3% to partner):
$54,507,000 x 0.56= $30,523,920
Earnings per share:
$32,159,130 / 63,600,000 (78,000,000 as pointed out by Original_Braila) shares = $0.41 per share
$1.83/ $0.41 = 4.46 forward P/E ratio!
As you can see, despite a 41% tax burden, the forward P/E ratio remains remarkably low. I don't think Capstone can stay under $2.00 for much longer.
I also think that Silverstone will have very good gains very fast because the float will be very small and tight. As soon as they report a good drill result, they will really fly.
Note: Of course I am using today's current metals prices for my calculations. People have been saying copper is due for a correction since $2.70 (or even earlier) and yet it continues to rocket forward. Will it be this high in a year? I think yes, and in fact I think it will be much higher than this!