start here

start here

The Daily IKN email digest, get all daily posts sent to you next day (& no ads)

I say things on Twitter

10/17/08

Fortuna Silver: If you needed proof that the market is crazy......


.....Fortuna Silver (FVI.v) is now fully priced only on its cash at bank.

With U$46.6m in cash at bank (yep...real cash. Folding bills. Don't confuse it with 'working capital' either, as that stands at U$55m) and shares out at 85m, this means each share has C$0.65 of cash to back it up. The share price is now C$0.55.

Let's put this as simply as possible: Buy FVI.v stock at C$0.55 and you get C$0.65 worth of cash. And that doesn't even include:
  • A working mine that made over $4m last quarter
  • $14m worth of plant and equipment
  • A hedge book that sells a large slug of its zinc and lead production at $1.10 to $1.20/lb
  • A very large and exciting silver mine project in Mexico that is already a long way down the development track
  • Wonderful new rich vein finds at the Caylloma mine that promise to extend mine life way way into the future
  • A damn good management team
  • etc
So if you like, buy the company out at 55c, sell the machinery, keep the cash, give the two properties away to charity or something and keep the twenty five million dollar profit that you make. It wouldn't be a bad day's work, would it? And I bet the charities would be happy, too.

The bottom line is less flippant. All the above is an example of market inefficiency, and this is what the investor should always be on the lookout for. It might be very tough on junior miners with no cash at bank at the moment, but if the market thinks their properties aren't going to get developed any time soon and they have no cash to support themselves, then at least the market has a reason for pricing them way way down (be that reason proved correct or false over time). But pricing a working mine with positive cash flow at the amount of cash it has in bank? Gimme a break!

I suggest you do some DD on Fortuna Silver, folks. I'm quite sure that once you do you'll come to the same "it's a buy" conclusion as I do. Here's the link to the company website.