Hey sydneyguy
Thank you for your calculation and contribution to the discussion.
The devils always lie in the details.
A few points I would like to make
1. what the report showed is just the December quarter was a disaster.
Look at the trade and other payables at 31/Dec/19: that is
32M that has not been paid to their suppliers/contractors at the end of the quarter, and will be due soon.
"Trade and other payables increased from A$9.37 million at 31 December 2017 to A$32.97 millionat 31 December 2018 due largely to A$8 million in accrued business acquisition costs in relationto the acquisition of Tawana by Alliance following implementation of the Scheme. The completionof commissioning and commencement of production at the Bald Hill Mine during the year ended31 December 2018 also resulted in an increase of approximately A$15.6 million in trade and otherpayables at 31 December 2018."
If you look at the cashflow report , during the December quarter, they have not paid a single cent for the merger cost, and probably a large chunk of development cost too. It's all going to come in the next quarters.
With the shipments in this current quarter generating about 50M of revenue, the bulk of it would be just used to pay for those costs that incurred in the December quarter, and leave a very thin balance sheet. That is probably why they have drawn another 7M in the Jan-Mar quarter.
In summary for the December quarter, they have drawn 20m loan(we can count it as 15M as they repaid 5M existing debt ), and left with a big hole of 32M payables by the end of it.
2. This explained why the projected outflow for the March quarter is at such a high number 51M
If the cash outflows remains at 51M for another 2-3 quarters, this will mean further debts/ CR.
51M x 4 is about 200M/ per year of cash outflow, and their revenue at its best, assuming nameplate production/ another uptake partner and regular shipments, will be only at 180M per year.
A lot of theses costs are one time costs so I would expect the cash outflow to drop quarter by quarter, but any operation hiccups like the December quarter will be problematic.
3. I dont believe there will be further costs incurred for the merger in the subsequent quarters. It probably costs about 12M for the merger and it's just has not been paid yet.
4. As for the further draw down of 7M loan in the Mar quarter, I agree with you that I dont believe it's because the management wants to save the interest cost. But I disagree with you that the current loan has higher interest than the previous loan, I think it is probably slightly cheaper, but not by a large margin. (if you want to count the 2% redemption premium as interest, there is probably similar terms in the previous loan too)
I think MC draw the 20M loan due to a very tight balance sheet, but maybe he does not need that much so 13M loan was repaid early (This is just my sepeculation)
5. Going forward the March quarter results will be important to follow, and I will follow up closely on the cost side and cash outflows. Now we have a combined company and accounting wise it is much easier to see whether they have met the targets.
I like the fact that they still have 11M of cash as of 14th March, and one more shipment at the end of the month will provide about 10M revenue.
Overall I m cautiously optimistic and will continue to hold, but the company is on a thin thread and there is not much room for surprises.
