RE:RE:RE:RE:How Close?Goldpet, I'll try and answer why we went so far in the hole as far as working capital is concerned and point out a few items of further concern. I'm not a CPA so some of it is hard to explain and I don't want to bore everyone to death but here's what I see. We went $58 million farther in debt during the fourth quarter of FY 2013 for the following reasons:
Cash on hand dropped by $6,770,000. That's easy we're spending more money than we make.
The current value of the mined ore to be used for heap-leaching (called inventory on the balance sheet) increased by $4,420,000 to $27,350,000. Now this actually helped the working capital balance but I'm concerned about the actual value of this inventory number. The $27,350,000 of inventory represents the supposed value of the ore piled up for heap-leaching to be recovered by June 30, 2014. I don't know how the auditors arrived at the number but lets do some math. At June 30, the price of gold was probably around $1,350 an ounce and the company projected that the cost to produce an ounce of gold through heap-leaching was $450 for a $900 operating profit per ounce. If you divide $27,350,000 by $900 you get 30,890 ounces produced from heap-leach by next June. As the company won't even start the heap-leach process until sometime in 2014, and it takes 3 to 6 months between pad loads, I don't believe they'll hit 3,000 ounces much less 30,000 by the end of June. But the auditors bought off on it.
Account payable jumped by $16,710,000. Pretty straight forward, they're not paying their bills on time. Think on this, at the start of the year, Inmet gave them $13,000,000 in cash for the ten year right to set up mining camps. The company blew through that like it was popcorn
Finance obligations jumped by $3,500,000 as they leased a lot of equipment in the fourth quarter. Thank god they've now got the equipment they need.
Bank loans currently payable increased by $11,180,000. What can I say, they're in hock.
The obligation to build waste water treatment plants for the locals increase current liabilites by $4,000,000.
Now the big one and the hardest to explain. The company failed to live up to its contract obligations for both the forward gold and silver pricing agreements by not delivering gold or cash on time on three separate occasions. The bank advanced the company approximately $60 million dollars at the start of the contract. The bank has the right to demand repayment of the outstanding balance of the advance plus penalties as the company has not lived up to the terms of the contract. The auditor's valued the outstanding amounts of the two contracts plus penalties at $32,250,000. As the bank can demand payment at any time, the auditor's required that this amount be listed as a current liability instead of a deferred liability. Not you might not agree with this as the bank could have foreclosed on us at the end of December but choose not to do so and will probably not do so in the future. Probably. The auditors don't buy probably. We are totally at the mercy of the German Bank.
Hope all of this helped.