cash balance is not equal to q2 earningssome people are freaking out about the drop in cash balance and wrongly think that would re-occur every quarter.
from The_Alchemist
For a “free cash flow machine” cash on hand is really dropping.
gcm is still a free cash flow machine. it is just that some people are confusing when and where the cash is going.
the $32 mil cash tax paid as stated in the news release goes toward paying taxes for the ENTIRE YEAR. that is not for a single quarter. gcm pays tax in the first half. the second half is when the huge free cash appears. since gcm is making a lot higher earnings with the higher gold price, they are paying a lot more tax in the first half which temporarily reduces cash. higher tax paid means higher earnings as others have said.
i bet some people seeing the news release thought that because the cash balance dropped, they must have negative earnings for q2. that is not true. in the financial statement, that large $32 mil tax paid only appears in the "Statement of Cash Flows". "Statement of Operations" in which earnings are calculated will have a lower income tax expense for q2 only, which is different from the $32 mil tax paid for the entire year. Certainly q2 earnings (adjusted) should be positive simply because they are selling gold at $1700 and their cost of production is way lower than that. Unadjusted earnings can vary due to non-cash items.
There are many things that can affect cash balance.
- cash subtracted from tax paid
- using cash to pay down accounts payable
- accounts receivable increased due to delayed payment from timing of shipments, VAT refund delayed
- using cash to increase inventories
- cash used to buy investments like caldas and goldx
- cash gained from the timing of sale of investment like guy
these things vary quarter to quarter. q2 cash drop is temporary and is not re-occurring. they make back the huge cash in the second half.
the people freaking out about a single quarter are not seeing the big picture.
make no mistake, gcm is still a “free cash flow machine”
over 200k oz selling at $1800 gold when aisc is below $1000 is a cash cow when the market cap is so low compared to other gold producers.