Ann: Quarterly Activities/Appendix 5B Cash Flow Report, page-33

I was sure someone worked it out by now, but if so, nobody wants to say it. Just seen @Franpower effort, and though I feel bad saying it... to quote Donald Trump "I'm not sure what he just said, and I'm not sure he knows what he said either" Step back, ignore stockpiles and event timing, just look at what actually happened in each Qtr to see how KMS are travelling and thus what the next Qtrs might look like imho.

C1 and C3 Cash Costs are Accrual basis figures, which means they are calculated when incurred as an invoice, not when you actually pay it. Missed it first time around because I was focussed more on the physical mining business than the financials... just like everyone else following Bruce's lead about "On an accrual basis, the June quarter was essentially operationally break even." (hat tip @AX-E)

In reality, and as noted in the Qtrly to be fair, KMS incurred $55.6M C1 Cash Cost even though they only paid $41.5M of those invoices by June 30. Usually the invoices paid over a Qtr roughly equal the work done, with 30, 60 day invoices sitting in Acc Payable and rolling over in Qtr to Qtr... just like Bruce explained with the NMag Ziron sales cash receipts, delayed sitting in Acc Rec but rolling over monthly with cash received roughly equal to production and sales. I've tried to summarise the situation simply and clearly, although it looks complicated


As Bruce rightly pointed out for revenue, the way to evaluate the operation is on an accrual basis to see the value of product actually produced, and what it actually cost to produce it. The way KMS calculate Cash Costs are clearly defined in the June Qtrly, and I see no reason why G&A would include Lease Payments contrary to their own definitions. I added in the same figures for the March Qtr to satisfy myself that the Cash Cost definitions and maths were correct... and as you see, all the figures for March closely match the cashflow report, right down to the negative $47M cashflow on the 'cash basis' it is presented.

KMS have held back $14M of invoices received, but included in C1 cash cost, compared to the $41.5M operating invoices actually paid. I can only 'prove' Acc Payable went up $14M when the Annual Report is released, but I'm happy for someone to contact the company and correct me if I'm wrong? The reason for holding back $14M of invoices until July is pretty obvious... they only had $15M cash in the bank June 30th. There were shipments of mag-con at the end of June that will send cash early July to cover any invoices pressing, but even with the $15M equity contribution they are really low on cash obviously. I suspect we'll see next Qtr that SFX have contributed another $7M in equity, and I reckon shortly...

The implications are two-fold. The June Qtr was close to "operationally break-even" on an accrual basis ($55.6 cost vs $$54 revenue) but still going backwards $20M on account of all the cash not technically Operating Costs. We now need to update the Sep Qtr forecast with similar $75M cash outflow, because for whatever savings they can find (and I have my doubts given they would have been in cost saving panic mode, while desperately trying to ship every tonne they could in June) costs rise with rising production and logistics and general inflation which oftens rolls over in the new fin year.

You can play around with more optimistic assumptions than I tabled below, but even with a trouble ramp up to 2.8Mt/Qtr mined and 191kt product they are still bleeding cash each Qtr unless grade/production suddenly lift, prices strongly rise or costs drastically fall...



I'm not changing my sentiment to sell, but the need for a CR and some good fortune on a deposit "that is consistently 30% OS and 25% more OS in the WCP feed" makes more nervous. Maybe I'm jumping at shadows, did check my maths twice to be sure I wouldn;t be accused of creating false panic, but I'm a little less relaxed than Bruce appears to be...

GLTAH