Paul Gardner, CFAAmerigo ResourcesARG.TOBUYMay 17, 2007

Has spiked, more room to go. Very large copper resources, with access to the tailings of one of the great copper mines in the world. They'll be able to produce at current levels for decades, and they really don't have to explore. Its tailings processing capabilities are very highly regarded. 

Believes it's in preliminary discussions to acquire another tailings opportunity. Whether that happens or not, he feels very, very good about the copper business for the next 5 years. Feels especially good about companies that can generate high margins and pay high dividends at current prices, as he feels that prices are going to go up. Yield is 3.46%, very handsome while you wait for copper prices to materially rise (which may take longer than people think).

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. 
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Copper extraction from re-processing tailings. A play on both copper and energy prices. Does well when energy prices are low and copper high. Margins get squeezed when energy prices rise or copper prices decline. Nice habit of paying out substantial amounts of free cashflow.

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. 
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(A Top Pick May 11/21, Up 10%) Believes copper demand will continue to rise (EV vehicles etc.) Opportunity to expand into other mine locations available. Will continue to hold stock and expects stock price to increase.

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.

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 and have done a super job of running the operations they have in Mexico. He is not a shareholder because of their low grade deposits. With a low grade, you have to be very conscious about costs and if there are any disruptions, these can be problematic.