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1) Can the Company explain the background to the qualification in the audit report.
A) The Company has been progressively growing turnover year on year. In 2021 alone, the company managed to increase the sales of gold by more than 68% compared to the previous year.
In line with the Company’s plans of continuous growth and to achieve its operational objectives for the current period
and looking forward, one of Altyn Gold’s subsidiaries in Kazakhstan made a prepayment to a contractor (an external independent service supplier), for mining services which is a normally accepted practice in the mining sector
in Kazakhstan.
The contractor has been providing its ore mining services for a number of years, providing a good level of service in terms of meeting agreed volumes and the quality of services provided.
On completion of the 2021 contract a further prepayment was made to maintain the continuity of operations and further the production growth into 2022. This was to enable the acquisition for the contractor’s for additional equipment and machinery required.
The principal area of concern as noted in the auditors’ report was the prepayment made to the contractor raised the risk of non-recovery in the event of a default on the prepayment in case of their bankruptcy or other issues. The
Company did mitigate at the time in relation to the recovery of monies by way of guarantees to reduce the exposure to the issue..
In relation to current trading the contractor has already carried out works in the amount of 70% which will be offset against the prepayment amount, and the risk of non-performance or default has subsequently decreased.
Management recommendations as noted by the Auditors and the Audit Committee are being acted on and are being implemented.
In order to prevent a recurrence of the situation from occurring again the company’s management will review, develop and implement the internal control policies with respect to advance payments to suppliers of
goods or services.
2) With Renaissance effectively out of action does the Company intend to appoint a new company broker?
A) Renaissance/Rencap were initially appointed as the Company were looking at raising finance in Russia - the broker had connections in the Russian market - the attraction was a source of cheaper funding with a favourable exchange
rate. As this market is now no longer viable - the Company has been looking at the appointment of a UK Broker.
3) Reporting continues to be disappointingly slow and minimal. In these uncertain times the company really needs
to be making more regular and timely updates. Especially drilling results, and other relevant information.
A) The point is taken on board that there needs to be an increase in the dissemination of information in relation to the feedback of the Companies activities - the current format of quarterly reporting is to be expanded to make
it more encompassing and detailed - and the aim to is disseminate the information within 4 weeks of the quarter end.
4) Could the management give guidance of the expected reserve grade going forward (Latest 1.97)- in 2022/2023
A) The expected grade is 2.2 in the forth coming year - and set to rise after that but unable to give definitive time scales after that in relation to moving up-to the CPR grade - at present with the gold price at its current level, it is the
Company’s objective to maximise ore throughput.
5) Teren-Sai. Significant detailed drill results here have never been released to my knowledge unlike for other miners. Any results given are in a summary form only. Why is this?
A) This is being considered at the moment - the Company is in the process of licence renewal and agreeing a detailed exploration program and a detailed RNS to outline the future developments is to be sent out once the process is complete.
6) Share price & PR related question
There are a number of factors that will affect the share value of the Company. But the the current level of the share price is disappointing. From its previous level of trading and development - the current management have
been progressing the development of the Company - The Company sees the main driver to the share price as being results - it is agreed PR is an issue and this will be addressed - but we have generally found that the PR firms as
providing very little value at a high cost. The Company is currently in the process of appointing a UK based broker.
HawaiiFiveO, thanks for the AGM feedback. It was interesting!!.....apparently pefectly normal behaviour in Kazakhstan that isn't acceptable here. Go figure.
7, Website. When can we expect a new improved company web site?
A) The Company believes the website is generally good but the point is taken on board that that the Company needs to update and refresh the design and layout – this will be addressed.
Many thanks to poster Palisz from the other site for this update.
Prepaying is perfectly normal behaviour anywhere and the company had done it before with the same subcontractor. I see no issue with that, especially when the subcontractor needs to buy new equipment. I think Altn were surprised by the auditors stance but knowing that now will ensure it won't happen again. Anyway the subcontractor have largely worked their way through the prepaid amount and given the good production figures, it was clearly a good plan - just needed to be tied up better considering Altns a plc etc..
Yes, it's cultural in the region. I know because I lived there for over 10 years. Many the time I had to pay taxi drivers early so they could buy fuel, or in advance with a restaurant booking, so they could buy in the raw materials for meals. It was a shock at first....
RightOn, is there much corruption in Kazahstan?...to ensure speedy & positive outcomes.
In the UK one donates to the Conservative party!!
I don't think there's any question of that here. Production costs per oz at $800 are amongst the lowest out there and this contract is being fulfilled, as it was last time.
Yes, bald-eagle, there is much, but it is often possible to avoid through the use of friends. I never made a corrupt payment in my times there (I was in senior management), but I did have to drink a lot of vodka on occasions!
ResearchCentre, I'm not saying there is any here? It was more a general question about things in Kazakhstan.
For Altyngold it would seem the auditor has encountered an irregularity that they didn't like....possibly perfectly normal and OK. However financial practices need to be reviewed and 'possibly' tightened (which is what the company are doing according to the AGM Q&A).
However the company is owned & run by the same family and the temptation is there....so a strong finance officer (chosen by the family!) is required. Hopefully this is a wakeup call and not a sign of things to come.
RightOn, I have read that about a lot of countries....that there is often a heavy drinking culture in business (perhaps slightly dated now). One needs to be able to handle one's drink. Personally I wouldn't last 5 minutes!
I think it's just a question of getting the right paperwork that makes UK pple happy. Over there they worry more about making sure they know suppliers they are dealing with well, that they've proved themselves before if it's a big contract and that they are trustworthy. For that environment where you depend on good families (ie if someone doesn't deliver they are in trouble with not just you but their own family) it's a very good system. In the UK you could do business as a plc with a bunch of pple you felt distinctly uncomfortable with and it would apparently be the right decision ie you wldnt get into trouble if the paperwork was right altho the supplier didn't deliver. I think the Kazakhs system is better but they will take more trouble from now on to get the paperwork right.
As a point of interest, there's no real temptation to act badly for the controlling family. Because they own so much of the company, if they take money themselves, it reduces the value of their shareholding by a multiple of that. They've taken ridiculously low wages for ages and were I believe quite upset by not getting the paperwork in order this last time. Mistakes happen but I think we will find this the last of that type
ResearchCentre, I cannot understand why they cannot do both.....the best of both worlds!! Use a 'family' company to supply goods & services AND have the paperwork (contract presumably) to show what was agreed.
Would it be such an insult to have a piece of paper signed?!
Altyn have to realise that there are reasons why such 'formalities' are required by UK accountancy law....it protects management as much as it protects investors.
Hopefully the company is proactive on this matter and they communicate the resolution to the market. It is an unnescessary distraction from getting gold out the ground.
Agreed bald_eagle - there is a very relaxed attitude to this that its just because things are done differently in Kazakhstan and the fact that a coach and horses has been driven through any acceptable form of minimum governance is neither here, not there despite investor confidence clearly having been hit further hence this trades on a PE of 1.5, with little sign of any change and a likely long road to winning what little there was anyway, back.
I also find it unacceptable they published financials via an RNS without disclosing the qualified audit opinion - its one thing blaming the local subsidiary, but those responsible at PLC level should have been aware.
The company made it very clear in the last AGM that this problem won't be happening again. My view is that they're a growing business, and very busy just making it work and with the problems brought in by the last couple of years. In circumstances like this sometimes you get behind on paperwork - I certainly do - but they'll make sure this isn't a problem in the future.
The biggest issue with this is they are a main market listed business seeking large investment to fund their expansion plans. Up until now they have failed to get any institutions on the register in part due to management credibility and part geopolitical risk. Consequently strong governance and adhering to regulatory requirements should be of paramount importance to them in order to rectify these perceptions.
Funding options have obviously dried up in Moscow and hence they are now talking about getting a UK broker. They have completely shot themselves in the foot with this qualified audit report as it will now be nigh on impossible to attract funds in London; even more so than before.
Remain invested, admittedly at a reduced level, just because the valuation is crazy low on a pure PE basis; nevertheless they are not helping themselves and personally think the road to recovery is going to be a long one. We have not even really bounced back from the recent lows.
Who cares? Water under the bridge as far as I'm concerned. So they lent some money to a supplier so they could carry out the work. Supplier has nearly finished the work. Who has lost? No one....in fact the supplier dug up lots of gold for the shareholders. Can't really see the problem here.
"Who cares?"
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jt321, lots of people. Credibility is really important....especially when they need funding.
I was being a little facetious bald eagle. Of course credibility is important but it's also important not to lose sight of the big picture. This was not a bad deal against the interests of the company. It was a good deal just incorrectly documented. You have to tick a lot of boxes in life. Your passport application will be rejected if you use blue not black ink. But it doesn't mean you're a crook. Hopefully they'll pay more attention to proper documentation from now on
jt321, I hope you are right....that this was simply a misplaced 'tick in one of the boxes of life'.
With no realistic source of external funding - apart from a loan from dad - every penny is important & must be accounted for.....rather ironic because this is a gold mine!