I could not be more bullish on Capstone Mining (OTCPK:CSFFF) today. Two years ago I heard Peter Schiff say that people should buy Capstone Mining at $3.2 a share before it was too late to buy it. Today, the price of Capstone mining is exactly $3.2 a share at a P/E around 12. So basically nothing happened to the share price and no dividend was paid to the shareholders. You would think that the company did nothing in those two years. But that is far from true.
(Click charts to expand)
Chart 1: Capstone Mining (TSE:CS)
First off its reserves have more than doubled and its resources have increased 36% in two years as can be seen on chart 2.
Chart 2: Reserve and resource growth per share
Secondly, the copper price is higher than it was two years ago as can be seen on chart 3.
Chart 3: Copper price (USD/lb)
Thirdly, during those two years Capstone Mining has been earning money. Its equity rose from $285 million (186 million shares) in December 2009, to $1.2 billion (376 million shares) in September 2011, after the acquisition of Far West Mining (Santo Domingo project) for $756 million . So the company basically quadrupled its size. If we look at this on a per share basis, the company rose from a book value of $1.53/share in 2009 to $3/share. Which means the company essentially doubled its equity value, while the stock price didn't even budge.
Fourthly, Capstone mining has an enormous amount of cash ($500 million) on the balance sheet and essentially no debt. So it has in excess of cash to fund its own development projects while having income from its two producing mines Minto and Cozamin.
Finally, the development projects Santo Domingo and Kutcho have already completed the pre-feasibility studies. This essentially means that investors are now looking out for a construction decision (and this construction period is the most bullish in general for mining companies).
|Chart 4: Life Cycle of a Mine|
Both projects will start production in about three years from now. And they are not small sized projects! As seen on Chart 5 these two projects will triple production as of 2016. And I'm sure copper prices will be much higher in 2016.
Chart 5: Growth in production
Capstone Mining is a bargain. In fact, Capstone Mining is so cheap that insiders (CEO, CFO, VP-exploration) bought shares at around $US 3 in September 2011. Peter Schiff told us to buy in 2009, now I tell you. Buy Capstone Mining while you still can. I see Capstone Mining at least tripling to $9 by 2015 if economic conditions stay the same.
Disclosure: I am long OTCPK:CSFFF.