1st Quarter Production ....
theRock17 posted this on Stockhouse ....
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We know that operating results at the Sigma Mine in January were ahead of budget.
The mine produced approximately 8,400 ounces of gold (budget 7,570 ounces) from approximately 121,400 tonnes of ore (budget 137,700 tonnes) at an average head grade of 2.28 g/t gold (budget 1.80 g/t). The estimated cash cost was approximately US$300 an ounce (budget US$326 an ounce).
February was a brutal month and my call is 5500 oz.
March was so-so, which means below the budget of 7570 oz.....and my call is 6000 oz.
Total production for Q1 is 20,000 oz , as my best estimate, with a cash cost of $375/0z, at an average POG of $550 for a cash flow of about $4 million cdn.
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stockhouse.ca
per theRock17
Total 1st Qtr Oz of Production are:
Jan 8,400
Feb 5,000
Mar 6,000
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Tot 19,400
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He dumbs it down to 20,000 oz.
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YEAR END 2005 INVENTORY
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Lets not get confused between two different concepts.
(a) What we produce.
(b) What we ship.
What we produce ALWAYS goes to inventory.
What we ship ALWAYS is a reduction to inventory
and is reflected in both the Revenue and Cost of
Goods Sold $$$ amounts on our P&L.
Revenue = the oz taken from inventory * the selling price
(net of any discounts, etc.)
COGS = the $$$ (cost) in Inventory that the production
was booked at.
From a really bad memory CMM had 2005 year-end inventory of
$2.4 million. (Inventories in general are always booked
at cost.)
To be super conservative I'm gonna say the cost to produce
the $2.4 million in inventory was $500 per oz.
Dividing $2.4 million / $500 = 4,800 oz in inventory.
In simple english this means we could/can ship this
4,800 oz any time we want. It ALSO means that the
Cost of Goods Sold that we book would be at $500 per
oz.
You can modify the cost assumption to something more
realistic and that will have the effect of (a) increasing
the # of oz in inventory at year-end 2005 and reducing
the cost of goods sold when we actually sell the oz.
Example:
Dividing $2.4 million / $400 = 6,000 oz in inventory.
The purpose of all the mumbo-jumbo above is to simply
say that we can ship 6,000 oz in Qtr-1-2006 from our
inventory.
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WARNING:
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I could be *ALL WET* on the above.
I have NO experince in mining.
I am assuming that the ONLY thing in inventory are oz of gold.
However, perhaps they book TRUCK TIRES or other types of thingies to inventory. I cannot imagine what it would
be .... but its the first day of school for me.
Note:
(I would assume truck tires get booked to expense immediately. But I am not really certain.)
Finally, think about Rock's March production assumption
or 6,000 oz. (I am going to the extreme so that you
SEE IT)
If it were all produced on the last day of March
then it
(a) would have to be booked to Inventory and
(b) because it was the last day of the month it might
be too late to SELL it in March. As such, we would
NOT generate any Revenues (and COGS) from it in the
first quarter - but could sell it in the 2nd quarter.
Also - none of the above is intended to confuse
theRock's primary point which was:
we did not PRODUCE as much gold oz as per the budget.
my point is to say that - even though we did not produce
as much gold as budget - we could still SHIP as much
gold as budgeted production because we ALREADY had
OZ in inventory ready to go.
If I have mis-portrayed what the world INVENTORY means
in terms of the mining industry .... please post
a correction to this post.
regards,
John McCarthy |
