A40 (ASX) Ann: Corporate and Operations Update

Originally posted by Rhino95: ↑

Coming in from an outside perspective here (I do not hold). Everyone seems to be very focused on the operations but no one is looking at the cashflow.

Receipts from customers this quarter $33,736,000

Payments for this quarter $40,717,000

^ That in itself is already a loss. Looking toward the future we can see estimated cash outflows increase to a total of $57,700,000. This is an increase of costs by $16,983,000.

Had you guys not received the below finance from Galaxy you would currently be ~$2,000,000 under.

This is factual information from the cashflow report. Stop blaming management, stop blaming the lithium market (although yes it is unfortunately not great at the moment), and look at the numbers.

Expand

Some comments on the cash flow chart.

Operating loss is 22M, but that has to be balanced against the inventory of 32kt, which equals about 32M of value. However, at the beginning of the quarter, inventory is 17M, so in total inventory increased by 32-17 15M. 15M-22M = -7M, which means even if the mine is able monetize all the inventory at AUD1000/ton, theres still an operational loss of 7M.

Then there’s other costs as well, interest is about 2M per quarter, royalty about 2M per quarter. Admin cost about 1-3M per quarter. These are pretty rigid and will not change much no matter what are the plant development
plans.
Net loss is thus about 12-14M per quarter, even if all products are sold.

If we add in drilling cost and development cost for the fines, then that would mean an additional 8-10M cost, which I think currently is pretty much on hold.

That explains the tight financial situation despite a CR raising 30M.
The mine is loosing money at the current spodumene prices, combined with delay in shipment, this is indeed very grim in the short term.
Cost of production needs to come down, however without a fines circuit and increased plant throughput, this is difficult to achieve.

The AUD $774/ton cash cost is pretty deceiving and is derived after much accounting tweaks. It is not a good reflection of the actual cost of production. Total production cost is 35,672000, if you divide this by total production 38717, the result is AUD $924/ton. This has not included royalties/interest/admin cost. Tatanum credit may offset the cost a bit, but not by a lot.

Tough ride ahead.