melbo24, It actually maintains a pretty good profit margin...

melbo24,

It actually maintains a pretty good profit margin because of the low costs at Co-O. Average operating margin for FY14 was 58%, which is far better than the majority of PM producers.

However, it is the cash flow which is a worry! They generated $49.7m of cash from ops over FY14 but spent $73.8m on inward investment (cap works, development and exploration). They need to have more cash coming in compared to cash going out before they can rebuild their cash position. Otherwise they would need to resort to financing through equity or debt as so many other producers have done in these difficult times.

Cutting 1,000 contractors will likely reduce development spend over FY15 and surely the spend on capital works for the expansion must be largely completed by now. So, even if production growth is stilted they can still improve their net cash flow if capital and development spend is brought down below OPCF. This is one of the issues facing the new MD.

Over the longer term, I would expect the issues limiting the tonnage of ore from the mine to be resolved and production, revenue and OPCF to all rise with throughput. But with the 1H15 guidance of 40k-45koz it appears that no quick fix for throughput is predicted, so in the interim, careful control of cash flow remains paramount.
CPDLC