La Negra Profitability Hi Sardi,
Regarding your questions what about revenues… I’d rather look at profitability.
If you back out shafter related losses in Q3:
Write down of PP&E $4,527,094
Write down of mineral properties $1,611,348
Idle mine cost $6,813,729
Totals are associated with Shafter equal $12,952,171
As a one time item take out the loss on sale of First majestic shares $420,968
totals to remove = $13,373,139
Net income is a loss of $15,468,790 - 13,373,139
La Negra net loss aprx $2,095,651
The approximate loss calculation may not be the exact amount but could be close with factors like TPD dropping 14%, price of silver averaging about 0.75c less, average grade for silver, zinc and lead being lower than Q2. Regardless Q2 barely made a profit and Q3 wasn’t any better.
Q4 financial results are difficult to be optimistic with when both average TPD dropping another 11.4%, silver eq 3.6% lower than Q3 and metal prices not being any better.
Q1 of 2014 is also difficult to see how profitable they could be even though it was a record silver eq production quarter, it was only about 12% better than Q2 2013. Silver is roughly 3.00+/- less per oz than Q2 2013 which is the last time they averaged 3000tpd, Q2/13 net income came in at $254,689.
Q2 2013 also did not have the new Mexican royalty regime in place to deal with - it became effective january 1 2014.
It is also interesting how one word is not in financial statements but is in the MDA for essentially the same paragraph - ADVERSELY - Care to compare see page 30 financial statements vs page 25 MDA
Mexican tax legislation changes
On October 31, 2013, the Mexican Senate passed the Mexican Tax Reform Bill enacting a tax deductible 7.5% mining royalty on earnings before the deduction of interest, taxes, depreciation and amortization. Further, precious metals mining companies will pay an additional 0.5% royalty on precious metals revenue and maintain a corporate tax rate of 30%. The proposal has been approved and is expected to be published in the Official Gazette at which point it will become Mexican law. The effective date of the law will be January 1, 2014. The tax is expected to adversely affect future earnings from the Company’s mining operations in Mexico.
Yes they did say that they would be reducing some costs at La Negra between management salaries and production efficiencies, but until those changes are proven effective - why should they deserve the benefit without a doubt with all the other unknowns that remain?
JW