RE:RE:One straw too many
Sorry, river, it's been a busy morning. I wasn't able to dial in to the conference call (the dog needed her walk) but look forward to the transcript/replay. Nonetheless, my immediate reaction is as follows:
1. Read note 1 to financial statements. It talks about, "The recoverability of the investment in Hope Bay is dependent upon the successful exploitation of economically recoverable reserves and resources,....and the ability to maintain profitable operations at Doris and other deposits at Hope Bay." I would expect that the audited year end results will carry stronger language from their auditors - a going concern paragraph.
2. Under the revised credit agreement, the company has to start paying down PRINCIPAL to the tune of $2.5 million US per Q starting April Fool's Day. Entire balance is due at year end 2020, but extendible (for a fee) to June 2021. We could well be in the glue for about the third time with this original construction debt.
3. Elsewhere in the notes, the credit agreement requires production throughput rates of 75% of the processing plant's nominal capacity. That means 1500 tons or tonnes per day. This is probably the least of our worries as I suppose we could run barren rock through the plant if need be.
4. Look carefully at slide 10 of Q3 presentation. The only way out is through a substantial expansion of the Hope Bay project. That is going to cost (I would guess) north of $200 million US. Probably more, as we're talking about the Arctic.
Just my opinion, I don't see Newmont or Resource Capital putting up that kind of money. Good money after bad, etc., etc. Time to pull the plug, sell this pig to Agnico or someone desperately wanting to expand out of Africa.