Ahhh Plough,
The three P's of posting on Hot Copper Phew! Phew! Phew!
You seem to have my map upside down and back to front.
I agree entirely that AIC is not a measure of profitability during the ramp up stage because it includes capital expenditure to increase production.
Spending $9.3m on mine development and plant and equipment to increase production does not turn a profit into a loss.
Adding that capital expenditure to costs to determine profit is exactly the opposite of what making a profit is all about and what I was trying to point out.
A couple of thoughts for today,
Those of us who are silly enough to invest in equities need to know and understand that businesses have two quite separate accounts for a very good reason.
(1) The profit and loss account reports Revenues for the period being reported and subtracts the expenses incurred in earning those revenues to arrive at a profit or loss.
(2) The balance sheet reports receipts from the sale of assets and cash received from the profit and loss account for inventory movements, amortisation and depreciation of assets as a result of sales made during the period. it also records capital expenditure incurred in buy inventory and other assets.
Key take aways :
( A) Profits and reductions in nett assets deliver positive cash flow
(B) losses and increases in assets deliver negative cash flow that needs to be funded somehow.
The main focus of an investor should be the balance sheetUnscrupulous managers make themselves look good and win performance awards by manipulating the profit and loss account by adding overvalued assets to the balance sheet.
HGO on the other hand does the opposite. last year it turned a $22.5m EBITDA into a loss of $24m by* treating the sale of the royalty to Freepoint as a financial liability - $14.4m rather than an obligation to pay a royalty of - $2m.Why? It's hard to believe I know but the real world outcome was they spent money on drilling which produced an increase in Resources which adds another hidden gem that is not given any value in the balance sheet. Loosing $14.4m because you have won the drilling jack pot is absolute rubbish.
* treating the expenditure incurred on developing the drifts out to the lodes that are being mined this year as a cost to produce the ore that was sold last year is again nonsense.
Transform your thinking "think and grow rich." Napoleon Hill
The further away from the grease you get the richer you will become. "Stop sweating and start thinking" My Mentor
(20min delay)