No one is taking any positives from the June quarterly report, it was clearly disappointing for holders to find out that production had failed to meet expectation.
But please let's not make it sound even worse by calling Cap Works 'sustaining capital', as the truth is that none of us know what the $9.4m was spent on over the quarter. It may well have been final accounts being settled after mill operation having reached nameplate capacity and therefore part of non-recurring CAPEX.
For the full year the OPCF looks to be c. $50.2m from sales of $85.7m. $75.9m was spent on inward investment leading to a negative FCF of -$25.7m. $34.6m of financing brought the net CF to +$8.97m for the year. Certainly nowhere near good enough after such a prolonged and expensive expansion, so management need to get things sorted out pronto!
Also worth remembering that Development and associated infrastructure expenditure for an underground mine are predominantly for the longer term and are expensed through the P&L via D&A, tapered in line with the life of mine. All levels at Co-O are still being actively mined so Scram drifts, Haulage drifts, Cross-cuts, Declines, Winzes and Shafts, along with their associated Power, HP air, ventilation, Lighting, Tracks, Chutes, et al, are long term assets in terms of overall costs of operations. D&A for FY2013 was $13.055m and for 1H14 was $6.304m so FY14 is likely to come in at c. $13-15m.
Lastly, MML is hardly alone in having negative Free Cash Flow!
Here is a selection of PM stocks with negative FCF based on their final results for 2013:
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