I wouldn’t be surprised if we see a bit of a sell down after this upcoming Quarterly is released. Whilst we’ve achieved a great deal in the Q, it does come at a cost.
You may recall in the Dec Quarterly, after a month and 20 days of ownership/production, our cash balance went down from $30m ish to $17.4m. Just after the close of the Q, we received $9.7m for production within the Q, and had gold in carbon sent off worth $2.9m, we expected to receive payment for this from Feb to June. The $9.7m & $2.9m brought our cash equivalent balance back up to $30m. We got sold down due to the market only looking at the headline $17.4m which was the balance at Q close.
The March Q results will probably be released Friday, last Q it was released an hour before close.
I’d expect revenue of $28-31m. This is based on 10,400oz production (we know 2 of the 3 month figures) at an average gold price of US$1735/oz at an exchange rate of .775
I also took into account the $9.7m produced last Q, included in this Q. However a (educated) guess of $3-6m (based on up to 1/4 production) will be produced this Q, but cash received next Q, I also assume $1.3m of the $2.9m gold in fines sent off, is received this Q. The $3-6m figure might be rubbery, but the rest fairly accurate, also they only had bullion of 332 oz at close last Q, that’s about 3 days production, so not much extra last Q production going into this Q.
10,400 x 1735 / .775 + 9.7m less 6m + 1.3m = A$28.2m
Expense wise
In the March Q, I’d expect at a minimum our expenses to almost double, probably a fair bit more. Our mining costs were only incurred for the 1 month 20 days of ownership, compared with the full 90 days for this Q, that works out at a 1.8 multiple (80% more).
Our expenses in the Dec Q (inc the capitalised drilling) was $20.4m multiply that by 1.8 = $36.7m
Admin & Corporate costs last Q was $2.083m, I’d guess the bulk of that was Corporate to do with the acquisition, they did say there were some one off costs associated with the acquisition, so if anything that may go down a bit.
On the other hand, in the Dec Q we had one Air Core rig for almost the whole 50 days, and a RC rig for the last few weeks. This Q we’ll have 2 RC rigs for the whole 90 days - I’m guessing the AC Rig was no longer needed & released? So drilling will go up more than the 80%. (also AC rigs are cheaper than RC)
The Plant is processing at a reduced rate this Q (4200pm Dec, now 3400). Some of that will be due to reduced grade, some due to reduced throughput. Some costs will be fixed, some not, at a guess I’d say operating costs reduced by 10% - so not the full 80% increase here.
Last update on the Morila operations, we saw the amount of work they’ve done, overhauling generators, plant overhauls, tailings storage facility, etc etc. I can see a big increase in this expenditure this Q.
Lastly I’d expect most billing to be on eg 30 days. A bit like the sales figures above, some expenses incurred last Q will be paid in the Mar Q. The Dec Q figure might be a bit understated because of this, so expenses might rise more than the 80% . In the June Q, I’d expect this to even out with the carry in from March Q and carryout of expenses into Sept Q balancing out.
Without putting numbers on it, I can see our expenses significantly exceeding our revenue.
The way I’ve worked it (adding in the 9.7m etc), that cash burn comes off the $17.4m not the $30m. They do have a $7m mortgage & have previously said they’d have no trouble getting bridging finance. I wouldn’t be surprised to see a finance facility announced before the Quarterly release. (maybe that’s where the 2 Docs met up again)
If the market reacted badly to our last Quarterly (assume based on cash balance) I don’t think the upcoming quarterly will get a good reception. Of course I’m looking forward to the commentary as to what has been achieved. The expenses merely reflect the work that has been done.
I am not at all worried by this, cash was always going to get tight till we produce from the Satellites, when expenses will only go up marginally (crushers/grinders) but production will more than double from present. Long term we’re kicking goals, getting on with the job, the way i see it, we may need a short term loan for 3 months till cash comes in from the satellite production.
