The turnaround has begun.

The turnaround has begun.

Medusa's finances are turning around with the completion of E15 shaft, recent Q3 results and company releases this week. Last post I asked if the Q3 result was sustainable.

I have now looked at this more closely following the company announcements on Monday.

Medusa has now revised it's guidance for FY production and AISC as expected. The revised guidance is still on the low side but gives the probability of positive surprises when Q4 production and FY results are announced.

Production should rise to approx 27.5k oz per qtr or 110k oz in the next full year.

Production was 29.8k oz in Q3.

From Monday's presentation, slide 7, it can be seen that the mill's processing has been increasing month on month - Jan, Feb, March. This is due to ore mined going up in tandem with the mill's processing as ore is processed directly rather than stockpiled on the ROM pad. Mill utilization has increased from 55% last year pre E15 shaft to approx 63% in March. So in March production was 14% ahead of the situation last year pre E15 shaft. I would expect this to be maintained subject to the fall off in production from the higher levels over time as guided by the company.

Medusa's FY19 guidance for AISC is at the lower end of $1050-1150 but is heading lower as costs are falling significantly as the benefits of the new E15 shaft take more effect. AISC is $939 in Q3 and likely to settle at $1,000 or less. Going forward this would give gross profit of $300 oz at $1300 gold.

Gross profit for next year should therefore be: 110k oz x $300 = $33 million

With cash of $19.7 million and bank borrowing of $7.4 million, net cash is $12.3 million.

With expected decent positive free cash flow qtr on qtr now it can be seen that the debt can quickly be repaid and the company can move from being net cash positive currently to cash positive with no debt.

Dividend payments to shareholders should be restarted before the end of this year.

Medusa Mkt Cap at 40.5c = A$84 million (US$59 million)

PE Ratio: 2