Ergh, sorry formatting on the cut and paste above is poor,...

Ergh, sorry formatting on the cut and paste above is poor, repeated post here and a request to remove post above has been submitted.

This is a response I posted to someone who suggested that management should have spent the money on expansion rather than pay a dividend. Some have even quipped that management don't know what to do with the cash so they are paying a dividend. Both of these comments are pretty naive in my opinion and just smacks of a lack of understanding of the business structure and objectives.


Rationale for paying a dividend from a cash management perspective (ignoring the desire to rewards holders including themselves as a long stated objective):

Cash on hand at 30th Jan: $16,090,000
Estimated Avg FCF per month: $3,128,850
Estimated Converted Options: 600,000,000
Cash from Converted Options: $15,000,000
Dividend Payout at $0.007: $24,312,629
Estimated Cash at March 31st (post dividend): $13,035,070
Net cash difference: -$3,054,929

Now, there is around $54m (approx a year) in ore sitting ON the ground, and an additional 3.5 years in the ground, but without additional proved up reserves they are in no hurry to burn through existing reserves. So increasing capacity is not on the immediate agenda. Why double capacity now when you still need to spend cash to prove up reserves, which although confidence on that front would be high, still needs to be proven? Frankly that would be an amateurish mistake.

So they will pay their dividend and cash reserves will continue to grow whilst the exploration of current tenement continues. At some point in the future a decision will be made to prioritize either increase capacity or expand into Timor-Leste. I suspect increase of capacity will occur first, but now is not the time. I suspect towards the end of this calendar year plans for expansion will emerge. Importantly, the initial plant was constructed with an $18m debenture (which was paid off a year early in October 2020). Some infrastructure has already been established for the expansion such as tailings dam. Moreover there will be cost benefits from existing plant, reducing the cost of expansion. But, using the $18m as a very conservative worst case cap on costs to double capacity, there is absolutely no reason discussion could not immediately begin on that front with an estimated cash position of $41,194,720 in December. Even paying another interim dividend for H2 FY21 to the now ~3.5bn shares would only cost another $6,946,465, leaving circa $35m in the kitty. Less some for plant and exploration, lets call it $30m. Based on that, I would not at all be surprised to see another special dividend announced in July/August, possibly something in the range of $0.003 ($10.4m). Still leaving $20m in the kitty which would be more than enough to cover costs of an expansion up front.

In other words, they can well and truly do both. They are a cash making machine relative to their size, and in my view have been grossly undervalued by the market for a long time.