Its confusing I know but the $25m mine development cost which, when you add Plant care and maintenance, corporate costs and exploration goes up to $40m, only got us to first production producing 350t of copper in the first month. At 40% capacity we were forecast to be producing to 1,200 to 1,400 t of cu per month.
To get there costs another $30m in mine development plus a little less in plant care and maintenance because it progressively being in productive use for some of the time, together with ongoing corporate and exploration costs so probably another $40m.
This was adequately funded from free cash flow based on a copper price of 13,500/t and no escalation in costs. When the price drops and costs go up the free cash flow to fund the ramp up falls short. Which means you either slow down the ramp up or raise a bit of capital.
The discovery of the deeps means that filling the plant could be achieved if they are pregnant with ore. Well worth raising a bit of capital to drill some holes and speed up getting the plant full if there is anything there. Fingers crossed. .
Debt wont be a viable option until the ramp up is a lot further advanced and strong cash flows are being banked. Debt would be a recipe for debtors prison before then. All could be lost in a liquidators sale. The present copper price and need to rais capital demonstrates that very clearly.
We will wake one morning soon and be pleasantly surprised at where the dilution has taken us.
HGO Price at posting:
6.7¢ Sentiment: Hold Disclosure: Held
