Opinions
Stockchase Insights
Amerigo Resources
ARG-T
PARTIAL BUY
Sep 25, 2024
Stock price when the opinion was issued
You might be interested:
Great company, but doesn’t like gold right now. There are only 2 commodities that he is currently excited about right now, natural gas and uranium. Uranium has been plunging. The problem with gold is that it is trading sideways. When a commodity is trading sideways, it is not an easy place to make money.
Great management team. One issue he has always had is that it is very low grade, at 0.3 grams per ton. Last year they had some issues with some transition ore they were going through. When they were mining this, their recoveries were not as high as they had hoped. He would really like to see them with some higher grade projects.
We think ARG is doing the right things. Debt was an issue in prior cycles, and it has cut/eliminated its dividend in the past. Now, it is in strong financial shape and very cheap at 8X earnings. It has been cash flow positive since 2015. It only has one (sponsored) analyst, but should grow EPS by 10%+ this year. Insiders own 13% and have been small buyers in the past six months. The stock is cheap, but so is the sector. New growth concerns have emerged. Still, the stock is up 15% YTD and 52% in a year. Its small size is still a risk, but for those looking beyond the current cycle it looks good, especially now that the balance sheet has been taken care of.
Unlock Premium - Try 5i Free
ARG is a small company with extreme leverage to copper. The stock is up big over the last year by nearly 53% and it pays a high yield at 6.7%. Recent quarterly results were very strong driven by copper price strength and cost management. The balance sheet is net cash positive which we like. There is some volatility around earnings and we will note that the dividend was stopped for eight years (2013 to 21). We consider it OK for copper exposure due to the sector and small cap risks.
Unlock Premium - Try 5i Free