It’s all going to come down to how much gold can be produced from here on in, from the gold forecast production graph in the quarterly, they are targeting 20,000oz for the coming March quarter and at least 25,000oz per quarter after that. If they can achieve those targets then IMO CAI will have a very profitable gold mining operation, at these current gold prices.
At 20,000ozs quarterly production, 11,750oz of production will be hedged at $2,392 and 8,250ozs will be priced at spot prices. Based on todays prices, they should then get an average price of $2650 for the 20,000ozs, which comes to a gross revenue of $53 million. If we assume costs for the coming quarter stay the same as the previous quarter, for development, admin costs and loan repayments, which totalled about $50 million, it should then show a net profit of about $3 million for the March quarter. However IMO development/production costs should considerably lower as the cut-back operation is almost completed.
At 25,000ozs quarterly production, 11,750oz of production will be hedged at $2,392ozs and 13,250ozs will be priced at spot prices. Based on todays prices they should then get an average price of $2700 for the June and following quarters, which comes to a gross revenue of $67 million and assuming total costs remain the same at $50 million, then it show a net profit of $17 million for the quarter, provided costs stay at $50 million and gold prices remain at these levels.
By about mid next year all hedging should have been paid off and towards end of next year production will be hedge free. With a bullish gold price, CAI by next year should be fully cash up to develop, the underground operation at Warrawoona, restart Nullagine, develop Blue Star and other satellite deposits. Once both Warrawoona and Nullagine are in full production CAI could become a 250,000oz plus per annum gold producer.
A lot depends on the future gold price, which I am bullish on, DR getting his act together and with the new operations manager RM making it all happen, who is a very experienced operator, who was previously manager of Tropicana and Sunrise Dam gold operations.
This is my opinion only and should be not taken as financial advice.
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