-- Posted Wednesday, 22 October 2003 | Digg This Article
By: Tony Bortolin
Joe Investor here, just wondering if anyone had any comments, good or bad, regarding CZN.TO (CZICF.PK).
I have some shares and would like to trade information and theories. Best I can contribute:
-Is that not a 7-year bullish wedge that was broken upward last month with room to go up?:
-It seems the stock was once over $5.00CDN (back in the 1990’s) and of course the mine had not even been opened yet, as it still hasn’t. Could not find those back prices on the web but a representative of the Company (his name was John Kocela) advised me so today (October 21, 2003).
-The price of silver and zinc then dropped so the price of stock dropped and has lingered below about .50 Cdn for years until September 16, 2003 when the Company announced they had obtained a permit:
http://biz.yahoo.com/ccn/030916/b286e2eed11e145bccb2f4bc6c1ad4ad_1.html
-The total volume since September 16 has been over 40 mil shares:
http://tsedb.globeinvestor.com/invest/investSQL/tsx.price_history?pi_symbol=CZN-T
I believe this exceeds the float or number of shares available during this period. This is a clue that almost every current shareholder is new, and has bought into the Company between about .40 to .85. So unless the company gets bad news or whatever, it’s less likely that there is anyone willing to sell below current prices;
-A public offering was announced around October 8, 2003 at .50Cdn (see details in the Company’s press releases). The offering was substantially increased a few days later. The Company advised me that this was because the response to the original offering was so enthusiastic. In any case, I’ve been told the offering is over-subscribed and the stock has clearly gone up since the offering. When it closes, the Company says they’ll have “$8.1 million in cash with no debt”. They’ll be setting up a test mill to better assess recovery rates etc. so as to try to reach the bankable feasibility stage “over the next few months”.
-There seems to be an uptrend channel in the stock price since about Sep 19 as shown below:
-The Company website, press releases and/or a recent posting say they are sitting on over 70 mil oz of silver, plus 3 billion lbs. of zinc, along with some lead and copper; e.g. see:
http://biz.yahoo.com/ccn/030916/b286e2eed11e145bccb2f4bc6c1ad4ad_1.html
With silver at $5US per oz (or about $6.50Cdn per oz), 70 mil oz means over $450 million Cdn. of silver. And with zinc at say .40 per lb (or about .50Cdn per lb) that means about $1.5 billion Cdn of zinc. Plus the lead and so on… Meanwhile current market cap is only about $45 mil. Cdn?? (Market cap was estimated as follows: the Company advised it will have “50 mil shares, 54 mil. fully diluted,” after the recent offerings close; you can then multiply that many shares by the stock price of, say, .80 equals about $45 mil Cdn.)
-Okay, how much of those resources can it mine per year and at what gross profit? The press release (see the link above) refers to a Scope Study in 2001 (available on the Company web site at: http://www.canadianzinc.com/prairie/scoping.shtml) and the Study indicated:
“…a high grade start up plan… would allow the production of about 7 million ounces of silver per year for the first three years of mine life at an average silver cash cost, after all by product credits, of about US$1.48 per ounce of silver.”
So with silver at $5US and an average cash cost of $1.48US, that would mean a cash operating margin of about $3.50US per oz. Multiply that by 7 mil. oz per year equals over $24 mil. US per year. Converted to Cdn. at say, 1.3, equals over $30 mil. Cdn per year. With 54 mil. shares, that means about .56 per share Cdn per year. That’s not all profit due to financing charges and taxes etc. and there are many other risks, but that’s a good contribution to potential earnings and could obviously soon justify a price per share of several dollars.
-Why can they hope to mine the silver at such low costs? It seems it’s because of the zinc. The Study had indicated .34.5US per lb. of zinc was the break even cost. The price of zinc was low for a couple of years but it is currently over .40US per lb. So now they can look to mine the zinc at a healthy profit, (and out comes the silver along the way, plus some lead and copper). Specifically, the Study indicated:
“…with the mine capable of producing just over 90 million pounds of payable zinc per year; for every cent the Zn price is over the break-even production cost of US$ 34 cents per pound, pre tax and financing cash flow increases by around US$0.6 million.”
So not only can the silver be mined cheap, the zinc can add to the bottom line. At a price for zinc of, say, US$ 40 cents per lb., the contribution is US$ 40 cents minus US$ 34.5 cents or over 5 cents per lb. Multiply this by “US$0.6 million” which equals over $3 mil. US or about $4 mil. Cdn. Divide that by the number of shares and you get about 7 cents per share. And if zinc returns to its levels of over .50 per oz., the contribution from the zinc to the cash operating margin would be over 20 cents per share. That could cover a lot of taxes and financing charges on the silver.
-What’s the future price of zinc? I’m open to any chart readers as to the chart shown below:
-Many predict the USD is headed down; if so, the prices of commodities will go up (because it will cost more US Dollars to buy the same amount of silver or zinc etc.); so the Company’s cash operating margin and resulting profit could be even higher.
-Like any other silver stock, CZN is also a play on the price of silver. Some predict silver will go up 10 times or more, at least for a while. Generally speaking silver does not produce any income or steadily go up like real estate, equity stocks and other paper assets, but silver is a commodity that will always have value and there is only a fixed amount left on the planet. So if the masses temporarily lose faith in paper assets etc., as has happened, and as some predict will soon happen again, the objective becomes the preservation of wealth rather than earning income. The shifting of wealth into things like silver (and gold) would cause their prices to skyrocket. In the case of CZN, if silver were to reach a price of, say, US$50, the above information suggests the stock could easily earn CDN$8.00 in just one year. Meanwhile, the share price in under a dollar. I don’t know.
Any help would be appreciated.
Joe Investor
Tony Bortolin
eMail bortolin@pathcom.com
Toronto, Canada
Nothing in this article is intended as investment or professional advice or as a recommendation to buy or sell anything. Each reader is solely responsible for doing their own due diligence or obtaining their own professional advice before making any investment. All information is taken from sources believed to be correct and complete. Best of luck.
Disclosure: Tony Bortolin & GoldSeek.com did not receive any compensation for this report.
Tony Bortolin does have a position in this company at the time of publication.
GoldSeek.com does not have any position in this company at the time of this publication
-- Posted Wednesday, 22 October 2003 | Digg This Article
