After some reflection, something about the cash/cost metrics presented in yesterday's transition announcement looks v.fishy to me.
As mentioned in the announcement the cash balance as as 18 March was "approximately $2 million (excluding the $1 million to be received from Mineral Resources Limited)".
I'm not disputing the accuracy of this, as at 18 March (precisely), becuase I don't believe management would mislead the market with a blatant falsehood. That said, there is plenty of scope to misdirect with smoke and mirrors, whilst staying on the right side of the line.
How so?
Well, we know from previous reporting that the end-Dec cash balance was $3M. Yesterday's announcement implies total net cash burn of only $1M (i.e. $3M - $2M, for the mathematically challenged) for the first 11½ weeks of the 13-week quarter.
it bears repeating. Only $1M apparently spent so far during this (almost completed) quarter -- down from Dec's $4.2M net spend!
A pretty impressive reduction, right?
I was expecting the yet-to-be-completed March quarter total spend to be materially lower at, say, $2.5M, to reflect the current cost-saving efforts. That is, a reduction of ~$1.7M from last quarter, with further cost savings to come next quarter.
This ~$2.5M quarterly spend estimate (this qtr only) annualises to ~$10M p.a. It represents an annualised saving of ~$7M p.a. (ie. down from the ~$17M p.a. avg. net cash burn of recent years, which has previously been demonstrated).
Yesterday's announcement also mentioned, "...implementation of aggregated annualised costs savings of over $6 million...". When applied against the $17M p.a. actual spend of recent years this would imply an annualised revised current spend of ~$11M p.a. (~$2.75/qtr). That's not far off my current ~$10M p.a. (~$2.5M/qtr) estimate.
Now, let's annualise the numbers, based on ~$1M/qtr current net quartely spend, as implied from yesterday's announcement. (Yes, there is still 1½ weeks to go, but let's assume the bulk of outflows have already occurred. Yes, we may need to revisit this assumption.) This equates to $4M p.a. annualised cash burn, which would also equate to ~$13M p.a. in annualised cost savings (ie. $17M p.a. historical actual spend, less $4M p.a. annualised estimate).
A Simple Question: Why is management only crowing about having achieved $6M in annualised cost savings when it could be crowing about having found $13M of annualised cost savings??
For a company with a clear culture of over-accentuating the positive, it doesn't ring true that it would suddenly understate management's achievements.
While I don't doubt the accuracy of the current cash balance cited in yesterday's announcement, I very much doubt that it told the whole story.
Given the perilous near-term cash risks that existed, imo, prior to the recent deal with MIN, I believe certain material invoices relating to, say, the second half of this quarter were held-over and remained outstanding as at 18 March. They will be paid, naturally, but in delaying so had the effect, imo, of retaining more cash at bank than would have normally been the case. This allowed management to present a more healthy cash balance as at 18 March.
Imo, yesterday's announcement contained a 'glaring tell' which allowed some subjective testing of what management is implying re- the company's financal health.
Summary: As a result of, in part, of the detail presented above:
I don't, for one minute, believe the current quarterly spend has already been slashed to ~$1M.
I believe the 18 March cash snapshot was a somewhat contrived confidence-instilling exercise.
I think there's materially more cash to come out in the near-term, to pay held-over invoices following the 18 March cash snapshot.
That said, using my unchanged internal estimates, I think the company should have enough cash to squeeze through until Completion in, say, June when it banks another $6.5M from MIN, assumming receiving $500k for the Windarra water rights deal during the quarter and also some further cost shaving work.
Factoring the above bullet point, and subject to the quantum of further incremental cost-stripping next quarter, I'm thinking the end-June cash balance will likely be around $7-$7.5M. At that stage it will v.likely represent the forward-looking 12-month cash burn which will be consumed, then topped-up with the final $7.5M tranche from MIN in, say, June, 2025.
All thie above assumes reasonably tight cost control, with near-zero allowance for expensive drilling. Given the company has signalled its desire to drill at Windarra, I'm expecting (at this stage) a planned CR sometime in the second half of this CY.
(20min delay)