ozblue, Here we go round the houses again! I have already...

ozblue,

Here we go round the houses again!

I have already responded to your points a number of times. I have tried to put figures to the long-term benefits of development expenditure, I have tried to give you figures for estimated AISC to counter your perception of what you think it is, and I have tried to put some balance into your interpretation of the balance sheet. But I will try one more time!

Firstly, where did the money come from?
Share issues: FY06 = $11m, FY07 = $36m, FY09 = $28m, then the FY14 raising of $29.8m because of the SAG mill failure. Total (with options along the way) of $110m raised from shares.

Dividends: They have paid out $42m so net shareholder contributions are $110-42 = $68m.

Retained profits: the equity statement for FY14 shows a current level of $296m profit generated.

So shareholders contribution plus multiple years of retained profits = $68+$296 = $364m.

Debt: they had $9.3m of debt as at the end of FY14. So total funds are $364+$9.3 = $373.3m

What have they spent it on?
Carried amount of Plant, Property & Equipment = $115.5m
Carried amount of Exploration = $29.8m
Carried amount of Development = $231.9m
Total of $376.9m. (note this is after D&A of $66m being expensed against past profits)

You will notice the almost exact parity between the funds and the expenditure on assets. There are also receivables and liabilities as well as cash held, but they largely cancel out.

My point with going through this exercise is to demonstrate that a high cost producer could not hope to have figures such as above. High costs limit the profit margin available to invest in assets so they have to tap their shareholders or raise debt - and there is plenty of that about, just look at any bunch of other producers!

And MML has not just suddenly moved from being an obviously low-cost producer to a high-cost one in recent quarters or years. All-in costs/tonne milled have averaged $130/t over 6 years and actually FY14 showed a promising drop to $75/t although, clearly, fewer oz produced from those tonnes does temporarily raise the unit cost/oz of production. Grade over FY14 was low (thanks to high volumes of development ore) but as I have already posted, average head grade over 6 years is 7.4g/t, so it is quite reasonable that increasing amounts of stope ore will hopefully close that relatively small grade gap over time.

It is also worth noting that the gold price has moved up from $834/oz in FY09 and has averaged $1,306/oz over 6 years. So some of these contrary factors do balance out.

As for the AISC, well amongst the large number of producers that I research, their AISC is around $200-250/oz above their cash costs. What you are proposing is more like $800/oz above cash costs, which frankly I find ridiculous given their very profitable history!

Development outlays are largely capitalised because, by definition, those expenditures provide essential benefits to ongoing mining many years into the future. The money is still spent up front of course, it's then just tapered against future profits in line with standard accounting practice, just as it has been since MML first took over Co-O.

Likewise, Capital works. We know that work relating to the expansion is still ongoing as they tidy up in various areas, ie the recent crusher, new screens, improved leach tanks, et al. So it is to be expected that some plant and equipment is still being paid for. But to assume that ALL of the quarterly amount for P&E is sustaining capital is unreasonable. Common sense dictates that for a low tonnage, intensely manual operation such as Co-O, it would be difficult to dream up where you would need to spend anything like $3-4m per quarter for sustaining the operation. No massive trucks with huge tyres, no expensive excavators, etc, etc.

So there we have it. I have a totally different view on MML to yourself and we need to agree to differ as I really do not wish to keep spending so much time going over the same stuff.

Irrespective, I wish you well with whatever you invest in.
CPDLC