YEP - the dumbest thing they couldve ever done was to issue more debt!
They already have debt, and their last qtryly CASH-FLOW was bad due to lower grades and higher costs at around $2.80
***The company has said though that this qtr they have gotten to more of the 'good stuff' higher grade ore, and thus costs will go down; they are also expanding proddy, so that will further lower costs.
BUT WE NEED TO SEE THIS HAPPEN FIRST! THEYVE SAID A COUPLE OF TIMES ALREADY THAT THIS QTR THINGS ARE MUCH BETTER OPERATIONALLY THAN LAST. WE NEED TO SEE A GOOD QUATERLY AND INCREASED PRODDY. WE NEED TO SEE THE COSTS OF PRODDY GO DOWN AND thus CASH-FLOW BEING POSITIVE ENOUGH TO SERVICE DEBT LONG TERM.
this will no doubt happen when proddy doubles and expands further.
THE LAST THING WE NEED NOW THOUGH IS MORE DEBT IN THIS KIND OF MARKET! MAYBE IF COSTS WERE DOWN TO OR NEAR THE PROJECTED LONG TERM AVG OF $1.30 PER POUND AS HAS BEEN TOUTED BY THE COMPANY THIS WOULD NOT BE SO MUCH OF A PROBLEM, BUT I THINK WE ALL AGREE THAT WE NEED TO FIRST SEE
A PRODUCTION RAMP UP, OPERATIONAL EFFICIENCY AND OPTIMAL PRODUCTION FROM THE PLANT LOWERED COSTS
THEN , WHEN COSTS ARE DOWN, AND 'CASH-FLOW' IS LOOKING VERY GOOD AND STABLE TO SERVICE DEBT LONG-TERM, WE CAN THINK ABOUT GETTING MORE DEBT!
**** the management did the right thing. Obviously we need a few qtrs of stable production at optimal levels and we need to expand the proddy and lower costs. We need to see a few qtrs of stable production and good cash flow at the higher production rates!
Once this occurs, ill have more confidence in the company taking on MORE DEBT!
*****If they take on more debt and theres operational instability in the copper proddy and in the gold mine, they could fsce serious serious cash-flow problems!!!! With debt to service you could have another VRE on your hands!
So better to fully upgrade the copper proddy, and generate good cash-flow from the copper at lower costs once proddy is fully ramped up
Once theres consistent confidence in the copper operartion over a few qtrs and with the increased proddy with no majore glitches, confidence will be higher in terms of cash-flows and the servicing of more debts.
In fact id put off the gold mining altogther till the COPPER operation ramps up significantly and with no major glitches.
In the meantime you drill for more gold
smart prudent move
we dont want to move too fast or bite more than we can chew if the copper operation hasnt even been ramped up yet and hasnt delivered a few qtrs of optimal production with low costs and no glitches.
we dont want another VRE here
lets do things one step at a time
Once copper generates a tonne load of cash-flow, and does so for 2-3 qtrs, we can easily think bout getting the gold mine up and running
its too risky to have two operations in their early stages of production/development and debt financing them. If theres problems with the copper again down the line till its all smoothed out , the market will KILL this stock due to debt. The copper operation needs to be fully ramped and show its worth over a few qtrs in my opinion for them to take on more debt and development risk.
TMR Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
