Hi Charlie Boy, Trying to understand or get a clear picture of what is behind the actual trading results and financial position of a publicly listed company like BSR by analysis of the holding company's (BSR's) consolidated financial reports can be very time consuming especially when it has subsidiaries in other countries like Africa. The problem relates to the fact that even though those subsidiaries would produce their own Financial Statements for reporting to government agencies in the country in which they are domicile those results are consolidated into the holding company's reports back here in Australia which in some cases can contain less detail. To answer your question as to Bassari Resources Ltd (Australia) share in the gold producing operation in Senegal, it is currently 63%, with WATIC holding 27% and the Senegal Government holding 10%. These percentages represent each joint venture partner's interest in the likely gross revenue, total operating expenses and therefore net revenue as well as the assets and liabilities of the venture. The Senegal Government besides their 10% interest in the venture are entitled to a 5% royalty and another 0.5% for community works (5.5% in total) of all gross revenue from gold sales. As this this is applied to each $1 of gold sales made, for simplicity I reduced my gold price down to 94.5% of actual current price in my previous calculations. This might not be completely accurate as the royalty might be based on all gold sales net of selling expenses, but as my calculation of the likely total net revenue in year 1 of US$20.83 is just an estimate I believe any adjustment required would be insignificant.
From this estimated likely net revenue year 1 of US$ 20.83 million, BSR's share would be 63% about US$13.12 million, WATIC's is US$5.62 million and the Senegal Government US$ 2.08 million. Based on my simple understanding of it all, maybe BSR will have to report this revenue in $AUS in it's Holding Company's Financial reports from which expenses incurred by it in Australia can be deducted arriving at a consolidated net revenue for the it and it's subsidiaries. Off course this will not represent the cash it would have access to which could be considerably less given repayment of loan principal to the Coris Bank with any excess cash being left in it's subsidiaries to cover further exploration and expand operation. Without knowing all the complexities and details of the agreement between the parties and other agreements entered into, trying to accurately work out exactly what BSR's likely net cashflow would be at this point of time is near impossible. Honestly, you would have more luck determining exactly when first gold production is going to occur. I believe WATIC and the Government will see very little cash for sometime. Nor for that matter will BSR shareholders in the form of a dividend, that has already been stated by our Chairman. Any potential return to shareholders in the ensuing years will simple be gauged by fluctuations in BSR's share price.
From what I have been able to glean from BSR's last reported financials, Total Exploration Costs ranges somewhere between AUS$ 47.7 million to AUS$ 61.2 milllion or at today's exchange rate between US$33.94 million to US$43.54million. It is difficult to determine a more accurate figure from the consolidated accounts. However, in the last report it was reported that BSR's wholly owned (100%) subsidiary Bassari Resources Senegal SARL (BRSS) owes the parent company BSR AUS$47.7 million. I can only assume represents shareholder's funds that have been transferred or loaned to it to carry out the exploration work over there. I have no way of knowing for sure that the AUS$61.2 million reported as a non current asset is actually all subject to some reimbursement by the other parties to the project. If the lower figure is correct being US$33.94million to be reimbursed over time then WATIC would have to reimburse 27% - US$9.16 and the Government 10% - US3.39 million.
From what I have been told and have come to believe, i thought that the other parties to the project would not receive any of their share of the net revenue or profit until their share of BSR's Exploration expenses have been fully reimbursed. This may not be completely true. After looking through the December 2018 report in particular NOTE 3, The policy talks about these costs being accumulated in respect of each identifiable area but neglects to show what these areas are or the recoverable costs to date associated with each. It only provides one total figure.It also states the exploration costs associated with a particular area are recoverable over that area's mine production life.
If these cost reimbursements are restricted to those costs directly associated with a particular area bought into production and are to be made in line with the life of each actual mining area. It follows then that only exploration costs associated with Pits 1 to 4 are recoverable when production starts in this area and are recoverable from the other joint ventures over the life of that mining area. In this case stated as 3.4 years.
Note 3 of the report only provides one figure and does not break it up into all the individual areas of activity or the individual amounts associated with each area.Therefore, there is no way one can determine the actual amount of the exploration expenses that are required to b reimbursed by the other parties from stage 1 over the 3.4 years or any other area of endeavour for that matter..
For exhibition purposes only of like cashlow shares, I am using US$25 million as the total exploration costs of Makabingui Pits 1 - 4 ( the balance having been expended in other areas of exploration like Konkuotuo). Using this the total recovery rate per month would be about US$625,000 (3.4 yrs or 40 months) and from this US$7.5million per year. WATIC's required reimbursement would be in year 1 US$2,03 million (27%), the Government US$ 750,000 (10%) with the balance being recovered by BSR some US$4.75 Million (63%). Bassari is of course only reimbursing itself. . I have calcluated the total loan principal repayment would be for the 1st 12 months approx US8.14 million or BSR US$5.13million; WATIC US$2.2 million; Government US$810,000.
Using the above assumptions and figures the likely net revenue for each party would be as follows based on my expected net revenue of US$ 20.83 Million year 1.
BSR WATIC GOVRNMENT
% Share 63% 27% 10%
US$ Million US$ Million US$ Million
Share of Net Revenue Year 1 (US$ Millions) 13.12 5.62 2.08
Less- Contribution to Loan Principal Repayment 5.13 2.20 0.81
Less - Reimbursement to BSR - Exploration Costs 4.75 2.03 0.75
Net Surplus Revenue 8.37 1.39 0.52
In fact BSR would be entitled to receive US$8.37million plus US$7.53million being total recovery of previous exploration costs. Total US$15.9million.
Of course these results reflect an exploration cost to be reimbursed of US$25million which could be a completely wrong figure.
Ian and Alex would likely be the only ones to know for sure and they have decided not to share it in the accounts or it would have been broken down in NOTE 3 by area and amount recoverable. Answers to these question maybe given at the AGM. Is the capitalised exploration costs as shown in the Year Ended 31/12/2018 Financials of AUS$61.2million dollars all recoverable costs? If not how much of it is and what portion of this figure relates directly to the mining at Pits 1-4? Is the reimbursement by the other parties of their share of these costs to be made over the life of the mine in that particular area? In the case stage 1 this being 3.4 years. As you can see without this information at hand at best we are all only guessing.
To simply explain consolidated accounting as I understand it. BSR (Aust) the parent company raises capital here in Australia and overseas from shareholders and then makes a loan/s to it's 100% owned subsidiary, Bassari Resources Senegal SAR (BRSS) which in turn expends that money in Senegal mainly at this point of time on exploration costs. If the loan was for say $45 million, then in the accounts of BSR there would be an asset account along the lines of Loans to Subsidiaries for that amount. In the subsidiaries accounts (BRSS) it would have a liability recorded Loan from Parent or Holding Company (BSR) for the same amount. If BRSS had expended all this money on capitalised exploration costs it would also have a Non-Current Asset in it's Balance Sheet called Exploration and evaluation assets again for showing the same amount of $45 million. When preparing the Parent Company's (BSR) Financial Statements for the period, it consolidates BSR's accounts with those of BRSS eliminating inter company transactions being the loan of $45 million between them and simply recording in the parent company's Balance Sheet a Non Current Asset - Exploration and evaluation assets $45 million as if it had actually made the payments itself not it's subsidiary. Now that there is another subsidiary Makabingui Gold Operation SA (MGOS) in which BASSARI (BSR) has a 63% interest the consolidated reports may get a little harder to analyse in future. In fact, BSR the parent company may hold it's 63% in MGOS through it's 100% subsidiary BRSS, it can get fairly involved. A definition I found is Consolidated financial statements - are the "Financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent company and its subsidiaries are presented as those of a single economic entity", according to International Accounting Standard 27.
Maybe, someone might be able to enlighten me. Note 7 refers to a $700,000 financial liability on which interest was accrued of $56,000.00 (8%). Does anyone know what this loan is? An amount was reported in the Financials as at 31/12/2014 of $402,000 but I cannot find any details as to what it relates to or from who it was borrow In BSR's accounts. Maybe it was borrowed by the subsidiary.
CHEERS to ALL
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