December Quarterly shows Group Production Summary Costs rising...

December Quarterly shows Group Production Summary Costs rising (attributable gold produced) as follows:

DEC 11 - $1240 (34.2k oz)
MAR 12 - $1212 (42.8k oz)
JUN 12 - $1256 (43.9k oz)
SEP 12 - $1424 (44.2k oz)
DEC 12 - $1607 (33.3k oz)

Average selling price last quarter was $1654 but pog has fallen since then and currently sits around $1600/oz

Some rises in costs last quarter possibly one off (e.g. production shortfalls and stockpile write downs at Coolgardie) but even so there is simply not enough margin in this business at current $A1600 pog to support the expenditure on:

Admin - $4m last Q, $3m forecast for this Q (way too high still!)
Development - $3.4m last Q, $3m forecast for this Q
Exploration - $2.8m last Q, $11m forecast for this Q (!)

They are burning through Shandong's $225m

There are four ways FML could become a viable and sustainable business:

1. Cut right back on costs and run business for cash (this does not seem to be the strategy)

2. Expand production @ much lower unit cost (do not seem to be able to do this)

3. Price of gold rises significantly and stays there, e.g. $2,000 plus

4. Major new high grade / low cost discovery

So holding FML is really a bet on last two options: pog rise and/or FML making big new discoveries - two risky things dependent largely on luck. FML would be in deep strife if pog corrected downwards significantly.

As at 31/12 $211m cash and bullion and financing of $11m means net cash was $200m (excluding bonds posted)

Market cap @2.8c per share is $247m. So value on "the business" or EV is about $47m which seems about right. But cash is being rapidly spent away, so better hope for pog rise or some great drilling results. Otherwise may not be long before sp trading down towards (falling) cash backing.