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Hi RD2U, I think the accounting rules are applied correctly, but as you say, the information in the RNS may be a little misleading for the reader, if they were to take revenue per gold ounce and cash costs per ounce as being the determinants of operating profit/EBITDA or whichever measure you're trying to calculate when they both include the silver credit.
With regard to the filing issue, you can view the Ariana Exploration & Development 2018 accounts online at Companies House and you will see the restatement of the 2017 numbers and correction of the 2018 numbers to reflect Galata Madencilik as an investment rather than a subsidiary of Ariana Exploration & Development. This I understand was raised very late on in the audit/filing process requiring a great deal of extra work at that stage and ultimately resulted in the filing delay. As I said, the matter was in hand, but may have caused some upset. I know if the same thing happened to me I would be totally p****d off!
Cheers, Ash
Hi Paul, glad it's not just me that has been confused by this! Worth highlighting, I guess, so anyone doing a 'back of a fag packet' calculation of profit does not simple take the revenue per gold ounce less the cash cost. They may be disappointed with the final results.
Cheers, Ash
Hi Ash
Not sure I can add much value to what you have already stated. I have always understood the silver credit for cash cost purposes to be an offset in the mine production costs. The accounting rules would require the revenues to be quoted gross i.e. gold and silver sales added together for the accounting purposes in the audited accounts. The rules would require production costs to be adjusted for opening and closing stock movements i.e. not a cash item, the latest RNS also advises the silver was not sold! So cannot help you definitively, clearly not part of revenues! Here is a link to Yamana Gold Inc.
https://s22.q4cdn.com/899716706/files/doc_financials/quarterly/2015/Non-GAAP-Measures_Q2-2015.pdf
How are these items being dealt with? Maybe a question to Mike de Villiers as chairman of the audit committee, and chairman, expressing shareholders concern that the information provided in the RNS is not clear thereby leading to possible confusion.
FYI I have written to M DE V regarding the change of auditor. As I was similarly not satisfied with the explanations thus far provided. Apologies Ash as I know you are adamant that the changeover was entirely satisfactory due to amongst other possible issues, KPMG’s tardiness in meeting deadlines.
Atb
RD2U
Ash, there have been several times when I have been confused by the silver credit, it's easy to make the mistake of including it twice. Some of the sales figures Ariana give include the silver sales in with the sales of gold, but then deduct it from the cash cost. I wish they would keep it as sale or credit against cost, not both.
Hi CK, it won't be anything to do with loan repayments as the capital repayment element is a balance sheet item and the interest or 'profit' element is excluded from cash costs and reported as finance costs in the accounts.
What I am getting at here is on the one hand you have revenue, which includes both gold and silver sales and on the other, you have cash costs, which, by definition, also includes a credit for silver as a by-product. You would be double counting the value of silver sales by taking total revenue per ounce less cash costs. The true cash cost surely has to have the silver credit added back before you can compare it with total revenue to estimate the likely profit? Or when comparing costs with other producers without additional silver or who calculate the cash cost differently?
Cheers, Ash
The biggest difference between cash cost and actual cost is loan repayments which aren't included in the cash cost
Theres two ways of working the revenue either using (gold ounces x gold price) + (silver ounces x silver price) or alternatively (effective realised gold price x gold ounces) - the silver credit us already factored in by effective gold realised price = (silver sales $+ gold sales $)/gold ounces.
Morning all, had a thought about how cash costs are calculated by AAU. In the last RNS it states 'operating cash costs are inclusive of on-site costs and off-site charges and royalties specific to the project. It also includes adjustments for stockpile balances at the end of each quarter, in addition to an adjustment for by-product silver.'
Does this mean that when comparing revenue with cash cost, you have to ignore the silver credit included in the revenue per gold ounce and just use the realised gold price? Alternatively, perhaps another way of doing this would be to calculate the difference between the revenue per gold ounce and the realised gold price and add this back on to the cash cost figure. That would then probably give a better comparison with other gold only producers.
I am aware that they often refer the cash cost calculation back to the original scoping study calculation, but I've never seen that.
Any thoughts would be appreciated as I have never quite understood how the cash cost reconciles to the final cost of sale numbers in the accounts, which is always significantly higher, and this may be the reason.
Cheers, Ash