RE:RE:RE:RE:Nobody seems to understand that it's about ounces producedMiningman, you are correct that costs are too high given the head grade achieved. Cost reductions on the financial side will not affect cost of sales but they will increase pre-tax income. Debt payoff in Q3 eliminates interest of $8mill per qtr and $4mil in offtake obligation revaluation charges. These are ongoing savings.
The deferred tax liability is not detailed but is most likely accelerated depreciation using GAAP vs straightline depreciation in Canadian tax rules. This will hurt going forward until $42mil is paid to governments.
The direct costs (cost of sales) increased due to the following according to mgnt discussion:
The mill feed grade averaged 9.1 grams per tonne gold for the third quarter of 2019 compared to 12.4 grams per tonne gold in the comparable period in 2018. For the nine months ended September 30, 2019, the mill feed grade averaged 8.9 grams per tonne gold compared to 12.0 grams per tonne gold in the comparable period in 2018. The decrease in mill feed grade in the 2019 periods was the result of the mine progressing through lower grade areas and processing immediately available stopes that met the grade cut-off.
as mining progressed through mid-September, operational issues with two stopes prevented expected higher grade ore from being mined as planned. There was a hang-up of a key production stope and complications with sequencing another stope. As a result, readily available lower grade tonnage from operating stopes was substituted for the expected higher grade tonnage. Due to limited stope inventory, production mining in the fourth quarter will focus on maximizing tonnes to the mill, and all stopes above cut-off grade of approximately 5.0 grams per tonne gold will be mined and processed as they become available.
So 4th qtr will be hurt by direct costs associated with dilution as well as tax payments. If one is to invest here he must look beyond 4th qtr and trust?? mgnt that grade will improve. What good is 3800 tpd if dilution occurs.
On the plus side the company is free of debt now and the offtake obligation after the 4th qtr.