Post by
production05 on Jun 02, 2015 6:21am
Q1`15 Financials posted on SEDAR
One should read the company`s complete financials and MD&A reports, given NWM`s ongoing cash and debt issues in this low gold price environment. The overview below only represents a snapshot and does not provide a full appreciation of NWM`s business situation.
NWM produced 4,121 ounces in Q1 and sold 3,627 ounces.
Pg 7 of MD&A:
``The first quarter’s gold production was negatively impacted by working capital constraints that did not allow for the development of additional working areas within the existing pits. This has now been addressed and additional equipment has been deployed in order to expedite development.``
``The grade of mineralized material mined in the period averaged 0.40 g/t which is approximately the same as the grade realized in Q1 of 2014 (0.40 g/t). The current grade being mined is consistent with the life of mine reserve model.``
The realized US$ gold price was 1,199 per oz in Q1 - about $20 below the London gold fix price. The Q2 US$ gold price will likely be somewhat similar.
The revenues in Canadian dollars came in at $4,874,057. It means the Cdn$ gold price was around $1,344 per oz.
Cdn$4,874,057 / 3,627 sold ounces = Cdn$1,344
The Cdn$ (translated) price may be a bit higher in Q2. It is currently Cdn$1,483 right now and has been consistently around Cdn$1,425 - 1,500 for a while now. It`s not clear if NWM can realize that full Cdn price in Q2 though, as we don`t know all of the details with regards to foreign currency translations.
The US dollar went parabolic over the past year - the US dollar index went from around 80 to 100, although recently dropped to around 93.5, is back up to 97.18 right now. This impacts the reporting of our debt.
We are now reporting Cdn dollar debt of $26.4 million, up from Cdn$23.8M the previous quarter. This total represents both (the main debt) promissory notes and the demand loans. The parabolic movements in the US dollar is severely inflating Cdn $ reporting of the debt. The actual debt is $21.2 million in US dollars. We have to pay it back in US dollars. When NWM originally took out the debt the 2 currencies were near par (Cdn $ might have even been a bit stronger). If the US dollar weakens again, the reported Cdn $ debt could go back closer to the $21.2 million.
Meanwhile, we are taking a big hit on the Income Statement from the strength of the US$ (impact on our debt). The unrealized foreign exchange rate loss booked in the Income Statement for Q1 was Cdn $1.2 million - mainly related to the debt. As mentioned, this could go in the opposite direction at some point in the future (and become unrealized gains) if the US dollar drops back down.
The 15% interest on the debt is also killing us. We accrued Cdn $914K for interest on debt in Q1. This is booked to Accounts Payable. This is a big reason our Accounts Payable is now Cdn $12 million. Trade payables only accounts for $4.8 million. Half of the payables total ($6 million) represents accrued interest (still to be paid) on the debt. Needless to say, we need to renegotiate our debts as soon as possible. We need to roll them into long-term debts (payable much further down the road, once the mine realizes ramped up production levels) and negotiate an interest rate that is far lower than the predatory rate of 15%.
As such, the $1.2 million unrealized exchange loss and the $914K interest amount should be considered when reviewing the Income Statement. Those items are on our books, but no cash were paid out in Q1 (relating to them). Also, (normal) Depletion and Amortization of $265K was reported in Q1, but is a non-cash item.
NWM reported a Net Loss in Q1 of Cdn $2,068,158. The items highlighted above should be factored into your analysis. ``Excluding non-cash items overall NWM corporate operations for the quarter was a loss of $509,437.`` At the mine level, operations produced gross income of $528,462.
The Cdn dollar cash cost per oz was $972 in Q1. That`s probably around $870 per oz in terms of US dollars. They made this note on pg 8 of the MD&A: ``The lower cash cost per ounce in the quarter is a result of selective mining during the quarter and is not sustainable for the remainder of the year.`` Hopefully it doesn`t increase back up too much. Selective mining is a method that they use in normal times. It helps them to process each grade category separately to maximum efficiency. For example, the lower grade ore is stockpiled and leached on the heap leach pad in a much bigger pile (with maybe more solution) than the higher grade (better recovered) ore. Selective mining also allows them to use small mining machines to be more precise with the ore groups when mining - it minimizes wastes and maximizes ore sent to the pad for processing, thus reducing processing inefficiences. Perhaps they had to step up the selective mining efforts in Q1 (and squeeze out efficiency levels that are higher than normal), to levels that are not sustainable for an extended period of time.
Cash (and Cash Equivalents) was $1.1 million at end of Q1 - up a bit from $325K at end of Q4. Sales Tax Recovery Balance decreased a bit to $5.5 million at end of Q1, from $6.5 million at end of Q4. Maybe NWM received a small sales tax recovery payment from the Mexican gov`t in Q1.
At the end of the day, the low gold price and the overwhelming debt are both impacting us severely. The gold price will move higher at some point. We need to keep things going until that point - to reap the benefits. Hopefully NWM`s management and debt partner Renvest can find a solution for the debt situation that benefits all stakeholders.
Comment by
babedinkleman on Jun 02, 2015 7:31am
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