Mercator Minerals Ltd MLKKF

Musings on Mercator

[Sharpie009]

Patience is the key with this stock.  2009 was a challenging year given their commissioning issues which was partly driven by financial constraints.  Going forward financing issues have been resolved and the balance sheet looks strong.  The debt has been renegotiated favorably which in my opinion opens the door for a takeover bid in the not too distant future .  In my humble opinion TCM is the logical acquirer. 

Had some fun trying to reconcile their financials for the last two quarters September 2009 and December 2009 but to no avail.  Was trying to tie out their  financial results to the quarterly financial numbers presented in the Management Discussion and Analysis (the infamous page 10).  The financials clearly showed the loan covenant violation happening in the last quarter (December 2009) however the numbers presented in the MDA analysis(page 10) show EBIT being below the interest expense amount in the third quarter ending September.  Looks as if they would have been in breach in September had  expenses been accounted for in the correct quarters.  I don't think the books have been cooked as was suggested by another poster but would agree that given that December marked the end of the fiscal year and entailed a full blown audit the fourth quarter quarter would have had to include any additional costs incurred during the year but not yet reported in prior quarters.  Because previous quarters were unaudited it appears to me that the third quarter did not include all the costs that they probably should have (Accruals were understated). Not done deliberatly but more a function of the accounting process.  As a result third quarter results appear better than they were and fourth quarter results worse than they actually were since the auditors would have ensured that all full year costs were picked up in December even though some of these costs might have related to August or September. Basically for the full year expenses are correct but the third and fourth quarters are distorted.  I think that mangement in the MDA is trying to show results as if they had been properly recorded in the correct quarters which actually makes the fourth quarter not that bad.
In addition if management already knows that 2009 is a poor year financially speaking management would want to make sure that all costs are recorded in 2009 so that going forward in 2010 results will look more favourable. 
I wait with anticipation for the first quarter results which will be out in less than two weeks.