Why Has The Elder Mine, Recently Been, So Very Unprofitable? The recent extreme loss is Covid related ( a $703,000 net loss last quarter).
Last year's production numbers produced very satisfactory yearly financial numbers despite of a 5 week interuption due to the mechanical hoist failure at the Elder mine.
"...Rouyn-Noranda, Qubec, Canada, October 29, 2021 Abcourt Mines Inc. (TSX-V: ABI, Berlin: AML-BE and Frankfurt Stock Exchanges: AML-FF) (“Abcourt” or the “Corporation”), Abcourt declares excellent results for the 12-month period ended on June 30, 2021, with $3,4 M in gross profits and $ 2,4 M in net profits despite 5 weeks of interruption to repair the hoist motor at Elder..."
https://abcourt.ca/en/news/abcourt-declare-un-profit-net-de-24-m-pour-lexercice-termine-le-30-juin-2021/ The company has been slow to advance the Sleeping Giant Mine due to a lack of workers and perhaps also, due to Covid. Similar company wide Covid protocols have likely been in place at both facilities. They were not successful!
"...A net loss of $703,322 in 2021 compared to a net profit of $454,583 at December 31, 2020 explained in part by a decrease in the number of ounces of gold sold and an increase in production costs due to absences related to Covid-19..."
https://abcourt.ca/en/news/en-abcourt-fared-well-with-only-an-adjusted-loss-of-108774-and-a-net-loss-of-703322-in-the-second-quarter-ended-on-december-31-2021/ It doesn't take any astute observation or some special insider information to deduce that the lower gold production numbers from Elder were Covid related. This information is available in the company press releases.
The marginal operation at Elder can maximize it's profit potential, only if everyone is working. The maximum amount of low grade ore, must be successfully mined and then shipped to the mill. If the staff is infected and sick at home, then it stands to reason that this cannot happen.
Who's to blame for that? The workers or management? Or both?
I believe that the onus is on management to institute a strict Covid protocol and convey the need to its workers that they must, also act responsibly, outside of the workplace, in order to keep themselves well.
They must also understand that there are significant negative financial consequences for the company if they do not comply. If the company folds, then these same workers, have no job!
It is clear that the company has recently burned through a lot of the cash. They used to have a lot more!
For that reason, Abcourt is again forced to go to the market and beg, once again, for some additional survival capital. Their operation must not enter into a receivership position.
The loan from the Royal Bank is also subject to a lien on Abcourt's moveable equipment if the company defaults on its loan repayment. So this private placement must be successfully placed.
"...This loan will be secured by a movable hypothec on the equipment and rolling stock and by the accounts receivable..."
https://abcourt.ca/en/news/en-financing-of-65-m-completed-with-the-royal-bank-of-canada-for-the-development-of-the-sleeping-giant-mine/ Without equipment, who can mine?
If this present private placement is successful and if the Covid situation is not brought under control, how many additional private placements may still be necessary, to make?
The Covid variants continue to evolve. They are here, for awhile!
Abcourt shareholders have a right to feel concerned about the future of their investment!
We, as shareholders are not in this investment solely for prolongation of the Elder mine.
Elder still remains a useful mine.
But its ore production will be better utilized in conjuction with the ore that will be mined from the Sleeping Giant, other company assets, and/or the additional ore that may be toll milled, but with g/t values of a much higher grade!
Even low grade ore may offer some benefit. But it must be blended with higher grade gold. In Abcourt's case, their mill can become a much more efficient operation.
Abcourt still has the potential to become a very profitable concern. The gold price seems more stable, now at a higher price. And inflationary pressures are the likely cause! Rising interest rates can only control the demand part of the equation. The supply part of the equation is a much different matter!
So price inflation may continue for some time to come. And so the gold price may also go higher!
Many still remain hopeful for the commercial development of the Abcourt-Barvue mine. But how long have they waited for that?
The new CEO will have a lot on his plate!
We could now have a better driver at the wheel, with his focus, set straight ahead.
Let's hope this new driver, knows how to race!
The company's new CEO must get all of his team members, on board and on his side!.
From a financial perspective, Abcourt Mines still offers the potential, to deliver the goods!
But this company, is not there yet!
It's frustrating for the shareholder, to be invested in a company, that always seems to have to start over!
But, it's better to hope for the best, than to just look back, through a rearview mirror, as dark as is!
All the best! Java