RE: RE: RE: Am I reading this correctly?
I looked at the Molejon 43-101 last night and it is not clear at all what the royalty rate is thanks to a useless table (way to go geos) though it has been ~7% the last 6 quarters. They used 9% to optimize the pit shell in their economic parameters but I would assume this is being conservative
Any accounting “gain” on the reversal of Royalties Payable A/P is just that, an accounting gain. PTQ still had a $40M “Suppliers” A/P at the end of FQ2 (Nov 30/12) in addition to ~$13M in “royalties payable” A/P and any cash received will likely immediately go to pay these suppliers and it won’t cover the whole $40M. I am guessing a lot of the expansion costs (ball mill, leach pad contractor expansion, etc) are trapped in here and it has always been huge which was my main concern – the suppliers, not the shareholders own the company for the next couple years.
The other reason I am guessing a lot of the expansion costs are in the $40M is because PTQ shows their Mining and PDI divisions effectively separate now per above paragraph.
I think we will still have a negative current ratio if you simply adjust the FQ2 current ratio for the royalties forgiveness ($13M – let’s hope this is all Inmet, not Govt of Panama royalties), a potential cash payment, get rid of the DB stream (recorded as deferred revenue=liability) and get rid of the “Assets and Liabilities held for distribution to owners” which is the PDI part of the business being accounted for separately in anticipation of a spin-out. Still negative, but could potentially by 1.00X in 2-3 quarters by my gut feel. That totally ignores any Red Kite funding and start up costs for Lomero so I am high-level forecasting Panama here.
PTQ had another $10M of LT Debt split between current and LT liabilities that I would guess would be repaid and replaced by Red Kite debt.
Go look at the FQ2 balance sheet from Sedar. Note 12 is the A/P note. It is too complicated for a lot of institutional investors to bother with so they might wait. We are going to figure it out here though!
Let’s say we produce at 100k oz for the next couple years, manage to grow our resources, chew through the $40M supplier A/P and get at least a 1.00X current ratio, then we would be looking at $200M MC plus $140M in Red Kite Debt for $340M EV which would seem fair in today’s gold price environment at $1600, but could potentially be much higher at $2000+ gold if we control cash costs.
FYI – there is a PR from PTQ about a supplier suing them a few months ago. I haven’t seen anyone else mention this on any other board following PTQ (including iHUB PTQMF). I’m just telling is like it is.
The story is great though and this is the financial reality we need to rectify for a double.