Production & F/S Review
Would a new release be required (or needed) when the mill reaches 2,500tpd processing? I would think from a management clarity standpoint this would be beneficial to issue, since the conference call communicated this milestone would be reached by the end of month. Does anyone know?
Had a chance to peruse the financials today and things should start to get interesting when the production increases. Even at the lower grades of 4.0gpt, a mill throughput of 2,500tpd would help the company cross the threshold to continuous positive cash flow. Every day is critical to advancing the processing capabilities. It's a compounding equation, you see...
Greater processing volume = more free cash = more rapid growth (exploration & development) = debt retirement
I'm still perplexed why they didn't advance the mill faster early on....THAT is their mint for the future revenue. But, here we are.
Bottom line - the sooner LSG can escape the clutches of their 1) Sprott gold loan 2) Sprott standby credit line and 3) Convertible debt, the better off the company will be. In my opinion, LSG management has to be hoping the convertible debt will be converted so they can avoid the return payment of principal. At the rate they are ramping up the production (slow, slower, and slowest), they will not be generating the cash flow necessary to have enough $$$ on hand to make the lump sum payment necessary. That is why:
1) The share price is slumping further to current levels and;
2) The 6.25% debt is trading @ 91.25 (an effective 6.81% return)
Combining these facts, the fear being represented here by the market is that of a "going concern" statement on the financial statements for LSG for the year ended 12/31/2012. LSG basically has to the date of the Q4 financial statement release (mid-March 2013) to evidence significant increases in production, capable of sustaining OPERATIONS cash flow (not Investing or Financing), or else I see this statement being attached to the full-year financials.
For those of you not familiar with accounting terminology, a "Going Concern" statement is a death-blow to a company, which most likely would trigger clauses in financing arrangements and increased restricted cash requirements. LSG would be in a terrible positon to comply with these.
The time to increase production is NOW, for our sake and theirs. The sooner LSG gets to 3,000tpd and beyond, the closer a golden future is for all who know this company.
Golfcar72