RE:RE:VRIC UpdateTad wrote: edx
At PDAC 2015 last March, Nick had mentioned that the company was spending approximately $2.5 million per month. If the company has managed to reduce their costs by about $500,000 per month, that is quite an acheivement in cost containment . $1.5 million per qtr in lowered operating costs. That would help alleviate some of my concerns about the recent cash flow crunch, but not completely.
With the company's recent production results for Q4, and the approximate $6.3 million in total revenue, they were still generating less cash than needed to also pay for G&A on top of all operation costs. I suppose they were able to juggle payments around enough to keep the wolves at bay for yet another quarter ... but accounts payable will most certainly be going up once more ...???
Absolutely. At one point I was told they did have had to "prioritize" payments, which does mean someone was getting a late payment. But the gold they sold in Q4 was at an average price of under $1,100. It may not seem like much, but an extra $15 / oz @ so far into Q1 should help, especially if they start boosing the Ozs produced.
I am assuming that the 7 gpt grade that Nick is referring to for the current resource material being mined, that is the actual resource grade, and not the head grade taking into account the rock dilution of ~25% as per the Zaruma PEA ?
Using a 25% dilution factor we'd get the following at 7 gpt resource grade
7 gpt X 0.75 X 500tpd X 0.93 mill recovery rate X 90 days / 31.1 gr/oz = 7064 oz
7064 X $1100/oz = $7,770,400 / 3 = $2,590,133 / month revenue
If it is 7 gpt headgrade after dilution factor then we'd be looking at
7gpt X 500tpd X 0.93 mill recovery X 90 days / 31.1 gr/oz = 9420 oz
9420 X $1100/oz = $10,362,000 / 3 = $3,454,000 / month
I guess Nick was using a ballpark figure, as $3 million per month falls in the middle of the two calculations ?
He didn't say / I didn't ask, but I am fairly certain it's the second of your two scenarios. Remember that he was referring to $1,000 per Oz gold, not $1,100, so:
9420 X $1000/oz = $9,420,000 / 3 = $3,140,000 / month.
I wouldn't count on Abundancia right now. I did ask Nick for the average time it takes once a decline reaches a vein for it to start getting exploited. He flat out said it's not possible to give that because everything depends on the local geology, the location of the decline relative to the resource, how the vein is situated in the ground, etc. But let's ballpark - the company reached Tamayo in Q3 2015. Let's say they reached it in the middle of the quarter. They expected to start exploiting it by the end of Q4. To be clear, I did not recveive _explicit_ confirmation that Tamayo was part of their 500 TPD resource grade plan by end of 2015, I infered that. I should have asked, but it was like an hour and a half conversation and I was busy trying to scribble down all the important bits. If my inference is correct that they were expecting to exploit Tamayo by the end of Q4 2015, then it would have taken them about a quarter or quarter and a half to go from decline in position to exploitation. I would guess that's not a bad expectation to use (in the absence of any other information).
So if Nick was right that the decline had reached Abundancia (again, he didn't have the mine plan or latest update in front of him so basically said he believes they have reached it, but couldn't be 100% on it), I would expect to see exploitation by the start of Q3... just in time for loan repayments.
Here's the other "coincidence". The vertex financing extensions was announced on November 2, 2015. Remember that they updated their mine plan in Q4, so I'd bet they updated the mine plan in October based on the experience and new information they had at depth, went to Vertex and extended the terms. Loan repayments start on July 29, 2016. So here's my bet - their mine plan has them exploiting Abundancia by July 29, 2016.
So much potential with this company, along with the frustration of waiting .... and waiting ....
..... but ... maybe be a good thing in retrospect, with all the opportunity to average down over the past few months at these depressed share price levels. Added a good chunk of shares to the collection this morning.
I added some more this week as well.