Hi TG,
There are two aspects to consider if/when they recommence mining:
From a cashflow point of view we will be spending money to pay wages, transport etc when the mining recommences. There is no way around this. Regardless if we do it ourselves or pay a contractor to do it, the bank account is expected to decline as this will be an additional cash outflow we didnt have previously. Previously we were using up stockpiles (assets) now we need to mine it which will pay workers to do it (cash outflow). This is different to ASIC, dont mix them up, ill explain how.
Example 1:
Assume that we have no more ore stockpiles and that this quarter we mined 200,000 tons of ore and that we also used exactly the same amount of 200,000 tons of ore. Assume that we paid 2mil for mining and that 200,000 equals 10,000 tons of copper.
ASIC = $2mil/(10,000t x 2,200) = $0.09 per pound. (forget about all other costs for the moment)
1t = 2,200lb
Cash Outflow: -2mil
Stockpile: 0 tonnes ore
Example 2:
Now assume that we mine 300,000 tons in a quarter and we only use 200,000 tons to make 10,000 tons of copper cathode.. Assume that we paid 3mil for mining and that 200,000 equals 10,000 tons of copper.
ASIC = $2mil/(10,000 x 2,200) = $0.09 per pound. (same as before)
Cash Outflow: -3mil
Stockpile: 100,000 tons of ore
Next quarter we mine 100,000 tons of ore and because we were super efficient we mined it at a lower cost, of $500,000 for 100,000 tons. The AISC calculation when using 200,000t of ore is as follows:
ASIC= (1mil from last quarter + 500k from this quarter)/(10,000 x 2,200) = $0.068 per pound. (mining costs fell because we mined at a cheaper cost than what our stockpiles cost us to mine)
Cash Outflow: 0mil (because we didnt do any mining)
Stockpile: 0 tonnes ore
To answer your question, yes.. But it will depend how much we mine, if we mine more than what we need for the quarter the ore will be added to stockpiles and included in next quarters aisc, however cash flow will fall because we mined more.
Is that clear? somewhat hard to explain
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