When the quarterly report came out last week I was a little disappointed and said that I would email John Lanford so that he could address some of my concerns. Last night I did that and he was good enough to take the time out of his Saturday night and email me back directly which I thank him for. The following is my questions followed by his reply. I hope that it answers a few questions for Mundo investors.
Hi John,
I know you are a busy man so I will keep this as short as I can. I must say after reading the quarterly report this week I was a little alarmed by a few issues and it was actually the first time I have reduced my holding for quite some time. My questions are as follows.
Obviously production targets were not met for the last two months of the quarter. You have previously stated that production was separated into two halves, the second half being greater than the first. Was it lower than expected grade that has caused production of only 4000 ounces for both August and September and is this going to be the norm for the coming months or are there other factors that us shareholders are unaware of that are going to increase production in the coming months ?
After reading the report I noticed that unless you had accessed finance during the quarter the company would have actually ran out of money. Why was there no mention of this in the corporate part of the report as it seems pretty serious?
There was no mention of the ounces produced from Torrecillis only the grade, does this mean it was not self sufficient as far as funding goes this quarter and will it return to being self sufficient in the coming months?
The underground development at Engenho seems to be going quite well as you are now a few months ahead. I am just wondering is there a bottle-neck issue in the plant? If not why is the plant not running at nameplate as far as tonnes per month as this would increase production?
Im not sure who wrote the quarterly this time around but for me it had more holes in it than a block of swiss cheese. I have followed Mundo very closely since production start-up and am aware of every figure that has been forecast since then, therefore when something like this comes out it begs some questions. I believe Mundo a whole has been well managed and has been very good with informing the market of what's happening in the last 12 months and I also had the pleasure of watching you speak at the D+D and RRS which was very good. I guess all Im saying is after coming so far don't drop the ball now by not informing shareholders of the total picture.
Kind Regards
Hi Adam,
Never too busy to answer questions from a shareholder and I have always tried to be accessible and open. I wrote the quarterly report and take responsibility for it and you are right I may not have answered everything that is important to you and I will try and address this with you.
You are correct, we did miss production targets for the quarter which frankly was both a disappointment and a pain in the arse but mining sometimes is difficult. Part of this was due to us not getting all the tonnes from a pillar that we were blasting which did have some good grade and tonnes in it. Frankly this was more a safety issue and no I will not allow peoples safety to be jeopardised. I did explain this in the quarterly but possibly not well enough. These were part of the schedules tonnes and grade which did cost us some ounces which we had scheduled. We also did explain in the quarterly that we were enhancing the size of the ROM pad. This has the effect of allowing us to control the mix of ore through the mill from a tonnes and grade. For instance we have two ore bodies, one a higher grade than the other. It is better is we can blend the ore and effectively manage the grade throughput rather than have periods of high and low grade as well as allowing us to accumulate tonnes on the surface for treating through the mill. For instance when we lost the access to the pillar we did have a period where we had to treat the low grade ore. Mining is a scheduling issue largely so sometime you have to mine ore in sequence. These are normal issues and don’t really get mentioned in quarterly reports although I acknowledge I probably should have been more diligent in my reporting. In October we have had full access to the ROM pad for the whole month and we have managed the grade well and are a little over forecast grade. We will be maybe 400 tonnes short but this is due to a scheduled mill reline change taking three days and not two. Frankly this happens. The mill is treating what we need at the moment and we get excellent availability. The mine is also delivering the tonnes, we have been caught more on scheduling but we expect this to be sorted in the near term. The team are very focused.
I am not sure if this answers your concerns but I am being as honest as I can but also being practical in trying to explain but not excuse. We are paid to deliver and we should!!
Re finance, we are doing a bucket load of work and have been managing our cashflow tightly. We do access an overdraft when we need to particularly during times when we are waiting for gold sales that happen twice each month. You will also note we spent capital funds during the month on the tailings dam, exploration etc and did have an effect via exchange rates. This is something we need to manage and we do. If you were at RSS you will note I did mention that we were managing this tightly and yes the directors are looking at our asset development strategy as all assets are developing well. It is inappropriate for me to comment about this more but we are focused on the longer term growth and confident in our future.
Re Torrecillas. I did not mention this and yes I should have. Yes we continue to develop and treat ore at around the same rate and no we do not subsidize current activities at Torrecillas nor have we scaled them back. In fact we have had some funds sent to Australia in the last couple of months but mainly it is self subsidizing as we have stated. I did not report this as the production is as we expect but yes I may well have caused undue concern with shareholders which is inappropriate of me. In actual fact the last truck we sent to the mill last week went 38g.t/ but generally we achieve an average of the +20g as we normally do.
I am sorry you have lost faith in the shares and accept we did under deliver this month but overall our assets are in fine condition and the issues we have are more issues mines sometimes have. They go broke if we manage for the short term and we do not look after the longer term.
I do apologise if we have let you down with your expectations and no I am not offering excuses nor trying to withhold information.
I trust this answers your questions the best I can and I do wish you well.
I did have a look at Hotcopper and did note we had pissed you off and you did say you would contact me so I was aware you would and wanted to respond promptly. Yes I must get a life given I am typing this Saturday evening but it is a luxury of being home and not travelling this week.
Regards
John
John Langford Mundo Minerals Limited 45 Ventnor Av West Perth WA 6005 Office: 61 (0)8 94298889 Fax: 61 (0)8 94298800 Mobile: 61 (0)418 935552 email: [email protected]
MUN Price at posting:
33.6¢ Sentiment: LT Buy Disclosure: Held
