Originally posted by Photis
For quite a while now, many have realised the investment case lies in the exploration potential in close proximity to Karouni. The operational update in December seems to have been swept under the carpet in that it further exacerbates the poor profitability of the current mining operation. I'm disappointed in how this update and the capital raising took place.
Suggestions that the CR could have been avoided, or is now proven unnecessary given the POG, are misguided. With the production guidance for the Dec QTR between 14k and 15k ounces, I am expecting a jump in AISC to between US$1000 and $1200, based on recent quarterly results. Odds are the number will be high range rather than low. If you are not expecting this number in the quarterly update later this month - be prepared. If we are lucky with the average rice realised (say $US1260), TRY may have made between $US1 million and $US2 million profit before debt payments.
Sept cash and equivalents were $US10M. A loan payment of $US3M was paid in October and then with a further US$1-2M in exploration and maybe another $1-2M to lower the trade creditors, it is no wonder TRY was struggling to pay the Dec QTR Investec loan payment. In my view, the US$2.7M CR would have been completed in the nick of time to complete the debt payment due on the 10th of Jan.
With the Jan and Mar quarter forecasts, TRY will run a tight operational rope again, which brings us back to the exploration potential. I can only hope that there will be enough funds left over from the CR and any SPP funds to do further exploration at Ohio Creek, start early mining and build the haul road required. A few culverts and earthworks across the river may not be too costly, fortunately. A further increase in POG will help, but don't count on AISC being lower than US$1200...
With all that being said, I believe the exploration potential is there and that is why I'm still holding and why I topped up at the open on the 24th of December. I plan to buy at least some from the SPP, and I hope most long term holders will do the same. This is of course not investment advice, but the factors above show that the company needs the cash injection and then perhaps the reward will come later this year.
If we can clear the Investec debt in the March quarter and increase reserves by the end of FY2019 to 250-350k oz. we may be able to start seeing market cap appreciation.
Good luck to all. There is much to weigh up and consider at the moment.
Your figures are spot on, my estimate is the same. I think December should have seen a 2m operational loss and current quarter should see a 2m positive cashflow. I do expect 1225 realized gold price, not 1260.
Current ops are not as bad as you make them because they have avoided to high grade the deposit and the best ore is still sitting in Smarts 3. But without the cutback and Smarts 4 the current grade is way below reserve grade and costs are higher. I expect a return to sub 900 aisc once the cutback is complete. Essentially there are now two ways going forward. Either concentrate on current ops, stop exploration, get the cutback done asap and return to 800-ish aisc. I think they might make the Investec debt repayment end of March. With considerable risk they will have to postpone it once again. The result 12-18 months down the road will be the plant cannot be fed for a time. Or they go the other road and speed up exploration. In that case the Investec debt cannot be repaid from operational cashflow and Investec will be hesitant to renegotiate because why would Investec let cash go into exploration funding when it could be used to pay down debt? So the SPP needs to be large enough to pay the Investec debt. That will avoid a lot of risk in the short-term and ensure there is no mill downtime 18 months down the road. The downside is there will be more shares issued at a price way below fair value. I very much prefer going down the second road. I am happy to lose maybe 15% of my relative stake when every indication is the new deposit is going to be a multiple in size and grade compared to current reserves. Also a SPP favors smaller shareholders compared to larger shareholders, a fact I happily accept. Better small shareholders get the relative benefit than institutional shareholders or banks.
Hopefully we will get new drill results soon, maybe there will be no question which road to take.
