What's concerning to me is that revised guidance for FY22 is now 62 - 68Kozs and to 31 January 2022 OBM have produced 37,510ozs (13,522 (in Q1) + 18,806 (in Q2) + 5,182 (Jan 22) = 37,510 so far) thus forecasting that they will be producing between 24,490 and 30,490 ozs for the remainder of the year. This is only a run rate of 4,898 to 6,098 ozs per month. During Q1 their sustaining cost (what is in AiSC - ignores capex on green fields exploration etc) was $37.26m in Q1/FY22 and $43.9m in Q1/FY22 (see Q2 quarterly report) or an average of $13.52m/month.
Their last gold sales were at $2,472/ozs (see Q2/FY22 report) which means that at 4,898ozs/month we are receiving revenue of $12.1m and at 6,098oz we receive $15.07m; we need to produce 5,469ozs a month (i.e to breakeven on AISC (this is still a loss on all in costs) - this is 16,407ozs/quarter. There may be some salvation in that the PoG is currently $2,624/ozs which with a refining margin (Perth mint's margin) of 5% would mean that the company would get about A$2,492/ozs (about the last sales price)I note their footnotes in their current (dated 22 Feb)
"The Company acknowledges that mining operations conducted to date have not achieved all of the Modifying Factors used to estimate the Ore Reserve. However, the operational issues continue to be reviewed, and Missouri is considered to be an early stage operation and the Company has not formed any conclusions that would materially impact Modifying Factors. A work stream has commenced that involves in-depth analysis of the operation and all the available technical data with the view to implementing remedial action to minimise the potential impacts on the Ore Reserve estimate. Any future updates to the Ore Reserve estimate will consider the actual performance of the operation in conjunction with typical industry parameters, to arrive at a position on the appropriate Modifying Factors to apply to the estimate, such that they continue to align with expected and achievable outcomes"
From my perspective I need some assurance from the company that they will be coming in at about the top end of revised guidance (~18,000 ozs/quarter) before investing more - I want to know that they forecast cash flow +ve on guidance before shelling out more (I'm sure Hawkes Point will also need some comfort in this area as well)
OBM Price at posting:
7.7¢ Sentiment: Hold Disclosure: Held
(20min delay)