excalibur,From FY13 Final Report.Net cash generated by...

excalibur,

From FY13 Final Report.

Net cash generated by operations = $94.802m

Ore processed = 309,648t

Therefore cash generated per tonne ore = $306.2

Gold sold = 77,488 oz

Therefore cash generated per oz = $1,223

Average PoG over FY13 = $1,610/oz

Cost per oz sold = 1,610 - 1,223 = $387

That is the underlying costs of operations with all the non-cash items like depreciation and amortisation stripped out.

The income statement shows the results including D&A and the attributable profit/share to holders.

Development and exploration expenditures on a producing asset are expensed as part of the costs of operations (as is sustaining capital expenditure) whereas Plant, EXPEX & Development outlays prior to production are capitalised and are then depreciated and amortised annually once those assets are brought into production on a tapered basis proportional to the life of the mine/ore body.

In the case of Co-O, the life of mine remains based on reserves which have been replenished every year (so far) by continued development throughout the ore body. This is typical for an underground mine which cannot be initially sized, as would an open pit for instance. So the LoM is a moveable feast which will, I expect, continue on for a few decades as the mine gets ever deeper and wider/longer.

The current expansion was budgeted at $70m but has probably strayed over budget thanks to various problems that have arisen - so assume c. $100m.

If one applies tapered D&A for just 10 years that would imply an additional c. $10m/annum. They are already quoting $13m D&A for FY13 but that must include a portion of the upgrade (ie the new Saga shaft and mine expansion works). But $10m/year of additional D&A on a targeted level of 200,000 oz/year implies an additional $50/oz.

In summary: the underlying operations remain very cost effective with profit margin averaging c. 69% over 4 FYs.
They have yet to prove the plant expansion thanks to the troublesome SAG mill power drive. But on the assumption that they will eventually get it all working then the resulting costs of the expansion tapered over the minimum LoM remain low on a production oz basis.

All in my honest opinion of course.
CPDLC