I agree, Qed, because you've looked at the financial statements. That's what one has to do to find the truth. You also need to add on admin cost of $6.37m, which equates to $76/oz across sales of 83,347oz in FY12. Then subtract $24/oz in finance income net of finance costs.
Poster 'Baphomet' on the RSG thread provided a useful discussion of cost reporting a few months ago. The different types of cost reporting are all useful when one understands their context.
"The 'Total Cost' quoted on page 2 of the quarterly report includes depreciation & amortisation (which are not cash costs) so these amounts are only relevant for calculating accounting-based profit - they have no relevance when forecasting a company's cash holding.
Also, this quoted 'Total Cost' does not take into account the majority of the items itemised in my previous cash flow reconciliation like capex, working capital, exploration, development, head office, and interest etc, therefore it doesn't assist when trying to forecast cash balances on a company level.
The purpose of quoting the 'Total Cost' is to basically present the profitability (not the cash-flow) of each individual gold operation on an accrual basis. Gold mines are not a going concern (they obviously have a limited life), so the total capex spent is rightfully depreciated/amortised over the project's life so you can gauge whether the mine was truly a worthwhile investment.
Furthermore, removing costs like exploration, interest, head office etc from the quoted 'Total Cost' gives a fairer representation of the underlying performance of each individual operation. It wouldn't be fair or just to apportion things like exploration/interest payments/growth capex to each individual mine as it would obscure the underlying performance of that particular mine. For example, a company could decide to go on a spending spree or takeover and load the company with excessive debt, and then apportion the very large interest payments &/or exploration budgets to each mine as an expense and consequently this would overinflate the mine's quoted 'Total Cost' - whilst the reality is that the mine is a low cost operation.
Cheers, Baphomet
There is a very big difference between the 'cash cost' reported by a gold stock and the 'actual cash flow' of the company.
'Cash Costs' will almost always not include cash outflows like royalties, head office costs, capex, taxes, exploration, development, working capital, currency movements and more.
The methodology you use to estimate ending cash flow will always result in a significant overinflated figure. All you need to do is analyse the reported cashflows in the quarterly report of any gold stock and use that as a template for future forecasting.
Data from RSG's last quarterly:
- 105,357 oz's produced @ A$741/oz cash cost - Only 70,827 oz's sold @ A$1,611/oz, remaining held as gold and converted to AUD in the quarterlt cash balances
RSG Opening Quarterly Cash ($ Million) $71.0
+ Gross Cash Inflows $80.7 - Royalty Payments $7.6 - Insurance, o/heads, operational support $1.1 - Operational Capex $7.7 - Tax $2.1 - Rehabilitation & Restoration $0.8 - Net Working Capital Outflows $1.3 - Exploration $4.3 - Development $3.8 - Other Investing Outflows $0.3 - Interest $4.1 - Share Buyback $1.7 - Debt Drawdown $0.3 - Forex Differentials $0.6
RSG Closing Quarterly Cash $116.0
So last quarter cash increased by $45 million, yet 105,357 oz's x cash margin (1,611 - 741) is $91.7 million. Thus, when you use an estimate like $5 million for non cash costs it can be out by circa $42 million as demonstrated above.
RSG Sale price per oz $1,611 'Cash Cost' per oz $ 741 Non 'Cash Cost' per oz $ 443
Consequently ($1,611 - $741 - $443) x 105,357 = $45 Million, which is the quarterly increase in the cash balance
Forecasting ending cash balance for next quarter?
- Interest expense will be way down as no more interest paid on convertible notes - Working capital can be a big positive or big negative number either way depending on timing of payments - Resolute held a lot of gold last quarter (maybe for tax reasons, especially with june 30 approaching) so gold price change will affect closing cash balance - Might be large prepayments in June quarter to reduce tax - Share buyback cash outflows (circa AUD$30 Million) - Possible Finkolo payment (USD$20 Million) - Make an estimate by itemising all the non-cash costs listed in the cash flow reconciliation - Estimate average price of gold for quarter, gold produced for quarter, and 'cash costs' per quarter. - Note that the 'Gross Cash Inflows' figure reported in the quarterly report will APPROXIMATE the total cash costs, so if you divide this figure by ounces produced you will get a reasonably close cash cost per ounce
