Wow lucky me!!!! I was so close with my prediction of negative cash flow being -$30m for the qtr... however, once you back out the $5.4 received from MMG on July 1, the actual cash burn was closer to -$36m. So even i (the supposed skeptic) was too optimistic on their quarterly performance.
They love talking about those C1 costs...and they look so damn good on the surface. Firstly, let’s not forget there can be significant amount of real costs not captured in the C1 and almost no real company quotes costs in this manner.
But for the sake of me not having to work out their all-in-cost (AIC), let’s use their low hurdle cost benchmark of C1 to look at profitability or lack thereof… To calculate the average zinc priced received i used revenues divided by tonnes/pounds. I know there may be some timing issues, but it should even out over the course of a year. For the September 2019 zinc price number, I used their September forecast revenue number in the June 19 qtrly.
Now most companies provide you with the average realized price for the quarter and I would happily use managements if they provided one. But as Krum correctly pointed out, they produce zinc concentrate not the metal and as a result, they only achieve 60-70% of the LME quoted zinc price. Unfortunately, this doesn’t compare well to their C1 cost metric, so what does your management team do? They leave it out, of course! Luckily for you, I’m happy to do the work and give my best estimate of the price they are achieving.
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| Dec-19 | Mar-19 | Jun-19 | Sep-19 |
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| 1 | C1 (US$) | $1.51 | $1.25 | $1.20 | $1.00 |
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| 2 | Zinc price recived US$ | $0.80 | $0.83 | $0.75 | $0.67 |
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| 3 | Zinc Produced |
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| 4 | - Tonnes | 12,080 | 18,170 | 20,450 | 26,171 |
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| 5 | - Pounds | 26,631,846 | 40,058,000 | 45,084,540 | 57,697,189 |
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| 6 | Loss per pound sold | $(0.713) | $(0.425) | $(0.446) | $(0.328) |
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| 7 | Loss on sales | $ (18,988,506) | $(17,024,650) | $(20,107,705) | $(18,924,678) |
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So this is the best case loss on production and it excludes admin costs, staff costs and MMG support fees etc etc….these amount to and additional -$7m a qtr FYI. Plus a bunch of other stuff it’s hard to work out.
These guys disclose cost in US$ pounds, broad revenue numbers in A$...hard to make it all work out. If I missed something let me know but these numbers adding in the additional costs plus development costs seem to reconcile well to the overall cash burn.
So yeah, ramp up is going well by the looks of it. Expect a cap raise in Q4.
