In an attempt to try and explain what I was saying yesterday a...

In an attempt to try and explain what I was saying yesterday a little more clearly:

Companies buy stock, store it and then sell it.

So, for example, in any given period you may have:

Stock at Beginning $100k
Add Purchases $20k
Less Cost goods sold $50k
Stock at end $60k

This is done to match the actual cost of items against the revenue it is sold for.

In the case of a mining operation it is the cost of getting it out the ground and moving it to an ore pad that forms the stock value. An average cost of mining ore is calculated, and this forms the inventory item in the balance sheet.

So:
Ore at cost at Start $100k (eg, 10,000 tonnes at mining cost of $10/t)
Add Ore mined $20k (2,000 tonnes)
Less ore sent to mill $50k (5000 tonnes - becomes part of the AISC)
Ore at cost at end $70k

In the case of BDR, most of the Ore in the stockpile is remnant ore of a lower grade, so most ore mined is moved straight to the mill and any under or over in the quarter is added/subtracted from the ore inventory.

BDR at the start of the financial year had 4.8M tonnes in stock at a grade of 0.73g/t for 113,000 ozs. And as per the annual report this cost A$30,160k to get it out the ground.

Therefore:

Stock of Ore at cost at Beginning.... $30,160k. (Cost per tonne $6.26)

March Qtr - 600k tonnes are mined but 1,000k tonnes are processed through the mill.
Therefore 400k tonnes is taken from the ore stockpiles for processing.

400k tonnes at $6.26 is $2,515k. Therefore ($30,160k-$2,515k):-

Stock of Ore at Cost at end Q1.... $27,647. (4.4M tonnes)

June Qtr - 600k mined and 860k processed. Therefore a further 260k tonnes are removed from stockpiles for processing.

260k tonnes at $6.26 is $1,634. Therefore ($27,647-$1,634):-

Stock of Ore at Cost at end Q2.... $26,013. (4.14M tonnes)

To repeat Q1 and Q2 are wet season, no ore added to inventory, just heavy drawdowns of the stockpiles.

In the accounts at the mid-year you would expect Ore at Cost as stated in the balance sheet to be about $26M, maybe $30-31M after adjusting for exchange rate fluctuations.

The actual Ore at cost value recorded in the mid-year financial accounts is $59,898k!!

A massive $30 MILLION above where you would expect it to be!!

The $30M is cost relating to mining ore during the first 2 qtrs, and taking it directly to the mill for processing, it should not have been added to inventory. This results in the AISC for the first half of the year being $30M( >$500 per oz) lower than it should be.

This is NOT my view, this is what the figures in the accounts state. You can’t argue with this, this is FACT!

Cheers

W