FQ3 Out - Highlights If you don't use Stockwatch to get instant accesst to FS/MD&A here are the highlights:
-$13M in cash received from Inmet for land lease advances. This was recorded as a liability and will be recognized into income over time. This improved the current ratio which should be any long's key focal point. No effect on EPS but increases our cash balance.
- $13.3M non-cash gain from Inmet Royalties forgiveness. This is an accounting entry only that boosted our EPS to $.07 for the quarter. The $13.3M accounts for $.06 of $.07 EPS so our normalized EPS is $.01 but there was some downtime for the ball mill installation. Basically PTQ reduces the royalties liability on their balance sheet (debit) and credits (income) $13.3M per their discussion from note 14 pasted below:
"Also in conjunction with the term sheet, Inmet has waived its right over 5% royalties from the Company’s sales at itsMolejon mine, in accordance with a previous agreement. The waiver resulted in a gain of $13,348,341, of which,$9,819,328 is recorded within non-operating income (expenses) and $3,529,013, pertaining to accrued royalties for fiscal 2013, is recorded within production costs in the Company’s statement of operations and comprehensive income."
- Accounts payable is still a massive $42 million but our "Operating Working Capital" ratio is .5X so we still have a long way to go to prove up the balance sheet. For Operating working capital you ignore current assets and liability held for distribution to owners (PDI spin out holding account) and the current portion of deferred revenue and LT debt (Deutshe Bank Loan - this is technically a financing, not operating issue). I assume the massive $42M of A/P is from payments for the mill expansion but they did not disclose their cash flow statement on a quarterly basis so will need to check against my model. Now that the mill expanion is complete we should be able to get a 1.00X ratio in F2014 with guidance for 90-100k ounces produced. I stress this because once (if?) Red Kite closes Petaqulla would have a big cash balance and the current ratio disapears but becuase of a financing event, not becuase of an operational ramp-up. Big difference.
- IMO the current ratio is the most important point of focus. With this in mind the subsequent event note below puts this into perspective. I would imagine they used a lot of the $13M in cash from Inmet for the land lease to pay their A/P suppliers and thus had to draw on the ilne of credit below:
"SUBSEQUENT EVENTS
Subsequent to the nine months ended February 28, 2013:
c) On April 11, 2013, a new credit line facility was approved by Metrobank, S.A. for Petaquilla Gold, S.A. in the amount of $3 million, repayable over 180 days at an annual interest rate of
7.50%. The proceeds of this facility will be used for working capital applications.
If you own as many gold stocks as I do you will want to crack a beer or three tonight. Let's hope Oullins has some good news.