Welcome To The Tamerlane Ventures Inc HUB On AGORACOM
Edit this title from the Fast Facts Section
Message: Stock analysis : TAM rocket ready to take off - potential to over CAD 1.50 2011
Of course as usual I take no responsibility what so ever for this stock analysis including its calculations, conclusions and eventual economic loss claimed to be caused by acting upon it. I have tried to do the analysis carefully and thorough but I as evereyone else except for insiders I depend on that the information presented by the actual company is correct and not misleading at all. There is always a big risk with investing money in the stock market, and you cannot predict everything that may affect the stock price. That said good luck and
DO YOUR OWN DUE DILIGENCE !
TAMERLANE VENTURES – stock potential to CAD 1.50 or more in 2011
Tamerlane Ventures (TSX-V, TAM) has a huge stock potential to reach CAD 1.50 or more until late next year (Dec 2011) if zink and lead prices maintain their current level of over USD 1.10/lb or rise even more. During the first seven months of 2007 TAM rallied some 400 % from CAD 0.6 to CAD 3. Now at CAD 0.3 there are around 100 % more shares fully diluted (80 M), so if you reduce the 2007 numbers by 50 % you get a hint of what could happen this time as this stock analysis will show.
The case is better now in 2010, since
1 .the Pine Point project is fully permitted and
2. the world economy is in an earlier state of progression after the deep recession which practically halted the company`s development plans in 2008.
1965-1987 Pine Point mines was the most profitable zinc and lead mine ever in Canada. Now its resources of zinc and lead still are huge, theoretically corresponding to over 8 billion USD of metal value if they had been mined and could be sold at current spot market prices. At CAD 0.30 the company market value is just around 24 million canadian dollars FD, indicating there could be a huge stock potential until next year if the MARKET EXPECTATIONS and understanding of costs and thus the profit margin will develop reasonable, which in fact is the case as we will se later.
Tamerlane states the break even level for the Pine Point project to a zinc price of USD 0.46/lb, which means that today`s metal prices are far beyond that critical level. The current price of over USD 1.15 is not exceptionally high though, since zinc has averaged around USD 1.1 the last 5 years.
The project will need to be financed with another USD 100 milllion to get it started and in production. The "half brother company" Century Mining Corporation, CMM also with M Kent and R Burns in management and board of directors succeded to fund a gold mining project last winter indicating they, especially M Kent, have abilities in this respect. The CMM stock rallied.
Now the really positive news in the Tamerlane presentation were that it is only expected a USD 10 million to be financed by equity, i.e. new shares. Thus there will be far less stock dilution 2011 in the final financing private placement (PP) than e.g. I had expected before, and possibly performed at a higher share price as well !
The second aspect is interesting since the higher the metal prices the higher the TAM stock usually is priced, thus causing the future PP to dilute less and therefore corresonding to a higher TAM price goal. This means that a higher value of the stock itself until financing pushes the fundamental value of the company upwards, AND withhigh leverage ! And since the leverage to higher metal prices is around 5 X, if you look at the figures in the presentation, the TAM stock potential is huge until the PP financing next year.
Tamerlane also has big future propects in its future copper project Los Pinos in Peru, although I just value it somewhat arbitrarily but probably cautiously at 15 % of the NPV of the Pine Point project. It has a big historical resource of great significance especially since copper is close to its all time high now.
Long term base metal prices are driven by fast growing economies such as China and India. Their GNPs are growing at such a high speed, and with China now the second biggest economy in the world, that base metals and crude oil prices will probably get higher and higher, beating inflation but with great volatility as in the past. According to recent very interesting findings developing countries at a certain faze during 10 years of their evolution the will have a growth in demand for e g base metals at around 4 (four!) times the higher rate than more mature economies (in relation to their GNP) indicating a rate around the double speed of their GNP growth. For example a 8 % GNP growth would correspond to an approximate 16 % growth in base metal demand, since mature economies are considered to have a base metal demand growth of around half of their (much slower) GNP growth. And since India still hasn´t reached that level of development yet and China has more years of speed growing ahead, base metals like zinc most likely will be priced higher the coming 5 years than the past 5 year average of USD 1.1 for zinc. Of course the world economy as a whole will have a big influence on base metal prices also, as well as the supply from old and new mines.
With a fixed Tamerlane weighted (2:1) zink and lead price of USD 1.10/lb the first nine years of the Pine Point project corresponds to a Net Present Value (with 10 % rate of interest) after tax of USD 144 million according to the company prestentation. As of now prices are even higher, and with a 5 X leverage a 10 % price increase on the average during all those 9 years corresponds to a huge 50 % higher NPV or USD 216 million.
The "bridge financing" will diliute the stock to at the most around 87 M shares, but I assume another 3 million shares for bridge financing later on in 2011.
I assume that the final finacing (USD 10 M according the presentation) will be done at CAD 0.50, which even could be too low if the stock starts to rally with higher metal prices which would be in accordance with my own expectations. Totally this sums up to, assuming 1 CAD = 1 USD, (80 +7 + 3 + 10/0.5) million shares FD = 110 million shares FD
Thus the fundamental potential of the TAM stock IF metal prices average USD 1.10 /lb the first 9 years of production is, also accepting the company presentation figures, around 1.15 ("Los Pinos factor") x 144/110 = ca CAD 1.50
And as shown above there is a huge leverage to higher zinc and lead prices than that. 10 % higher expected zinc and lead prices during the 9 first production years than USD 1.10/lb corresponds to 50 % rise in stock potential until financing next year, i.e. well over CAD 2 in 2011 !
Of course any potential has a corresponding risk. There is a BIG stock price risk in Tamerlane until financing, and it is mainly connected to metal prices and the world economy. IF there will be a double dip or it will just begin to be expected , metal prices and TAM as well will probably fall rapidly. In that case a TAM stock sell off might be urgent. So you have to be alert ! But on a risk/reward base a think TAM is a really "hot" investment now, maybe for another year or so. The stock HAS started to climb and there could be another rally like in 2007. Let´s hope that, but DO YOUR OWN DUE DILIGENCE also !
Please login to post a reply