Estimated copper production = 640,000 mined plus 10,000 3rd party concentrate, about flat with 2011.
My take = a little sandbagging because Cuajone project finished which should add to 2011, Plus Qubalix online during 2013 slightly increasing Cananea production. Plus, at 3Q CC, Jacob estimated 670,000 T for 2013.
Estimating 1,700 ton increase in moly due to Cananea moly plant startup.
Estimating zinc up 10,000 tons due to higher grade and flooded mine back online.
Estimating silver up 3 million oz due to higher grade.
Est gross cost per pound up 9 cents in 2013, but that will be offset by higher volumes of byproducts.
2013 = 1.8 B
2014 = 2.1 B
2015 = 1.4 B
Subtotal for 3 years = 5.3 billion
2016 & 2017 = 600 million each and maintenance capex = approx 300 million.
3 settled Peru labor contracts = only 13% of union workers in Peru. 3 big unions not settled, but in talks.
New Tia Maria enviromental study to be submitted late 1Q or early 2Q. Should be decided in 2013. Capex budget does include Tia Maria.
No plans to issue stock for capex while not explaining in detail how about 450,000 shares were sold or issued at end of year. Will wait for 10-K. I suspect they sold treasury shares.
Of 1.8 B 2013 capex, 1.4 B is in Mexico (where projects are not opposed).
There are 846 million shares out. If they earn 2.50 and pay 1.00 in dividends, that leaves about 1.27B for capex per year.
Capex for 2013 and 2014 = 3.9B. They have 1.5 B from last year bond issue. Two years of undistributed 1.27B = 2.54 B.
They might make it without borrowing more if copper prices stay up or rise and early projects add to cash flow.
But the message is clear. Without more borrowing, the payout ratio is likely to stay around this div for 3 years, which is fine with me because their buildout plans call for copper capacity to increase from 640,000 tons to 1.175 million tons by 2017. Over 500,000 more tons with little increase in corporate overhead. I can wait for the big bucks.
BTW...these guys know how to get ROI....they put 131 million into their 44% of Tantahuatay. In 2012, their share of the pretax profit was 48.7 million, a 37% pretax return in one year!!!
“Without more borrowing, the payout ratio is likely to stay around this div for 3 years.”
Dar, as usual your analysis is very cogent (and appreciated) …... but ….. as both you and I know, that the secondary driver of SCCO divident payout is GRUPO.
So ….. the question in my mind is ….... how much is GRUPO willing to give-up in the form of dividents in the future?
I guess it all depends on if GRUPO finds a better use for THEIR MONEY than investing in SCCO's capacity expansion ….... and that's a question for which I don't have an answer.
But ….. we might view the answer to this question as a two-edged sword ….. #1., if SCCO is GRUPO's best investment then we should be happy with their confidence in SCCO even if it results in a lower divident payout and #2., if GRUPO declares a higher SCCO divident in the future then they have found a better use for the money …. which will mean more money in our pocket but with an underlying GRUPO view that SCCO is not their best investment.
Lastly ….. and I cannot get this out of my mind ….. a lower divident payout may also serve to restrict share prices somewhat (by how much I can't say) and could afford GRUPO/SCCO the opportunity to buy-back more shares in the future at appealing levels. If SCCO is the long-term investment that many of us think it is, then why wouldn't we want to own more of it ….. or all of it ….. especially if we can buy it with generated cash? The private investor may call it a DRIP but I've got the sneaky feeling that's not what may be GRUPO's longer-term agenda.
Needless to say, I'll be keeping a close eye on future share buy-backs to help me understand the mindset of the owners of this company.
To expand …...
What would I FEEL, if, next week ( it ain't gonna happen), I received an SCCO buyout offer of …. I'll make up a number ….. 125% of share value ….. or, let's say $50 per share (pretty rich I'll admit)?
Hmmm …. I'd make a ton of profit, on one-third of which I would have to pay taxes (due to sheltered and non-sheltered holdings) ….. but ….. since I don't need the money, what would I do with the profit? I'm already holding too much cash while waiting for a market pull-back. Could I find a better investment? If I could, I'd have already invested that excess cash.
But that's just ME, your circumstances could be very different.
In short ….. if SCCO offered me $50 per share next week I'd feel CHEATED because, in my view and in my circumstances, a much greater future gain would be taken from me and I'm willing to wait.
I know, I know ….. a bird in the hand, hogs get slaughtered, never pass-up a sure thing, etc..
You may ask yourself (as I do almost daily) if I think so much of SCCO why don't I buy more right now? The answer is ….. I'm waiting for a better DEAL or, to state it a bit more succinctly, ….. GREED!
Those be my thoughts ….. what be youse?
I'm a little less optimistic. Basically Tia Maria is 2016 at best now. And thats assuming things move forward well from where we are currently at - thats far from certain.
Personally, I'm not interested in providing the funding for capital expenditures going forward. These projects have ROI's that can either support the borrowing of money for them or it can't. Give me the cash and I'll make my own investing decisions. If I like what is going on perhaps I'll buy more shares of SCCO. Borrowing will never be cheaper than it is now and thats what they should be doing to fund the expansions.
I didn't hear a well reasoned explanation for why production will be stagnant this year. I agree that given what they have laid out dividend payouts are going to be small for the foreseeable future.
"I didn't hear a well reasoned explanation for why production will be stagnant this year. "
Ever heard of design capacity? There are only so many tons of ore the mills can crush per day. There are only so many tons of cathode the sxew tanks can produce per day. Read the 10-K when it is filed. There is a table listing each producing facility's design capacity, amount produced, and percentage of capacity produced.
640,000 tons is flat out capacity, give or take, depending on ore grade.