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Yes a little confusing. I simply went with the 48.8T shipped from January to date. This is more that the quarter. However you slice this there is a bit of a challenge ahead - to put it mildly.
All companies report on a quarterly basis. Wres has to do the same. To report on one month at a time is asking for trouble. A quarter provides time to even out the peaks and troughs and a window to demonstrate improvement.
OK - so accounting for Tin my breakeven is 125 Tonnes.
My opex cost calculation is $2.2M + $0.5M interest. So $2.7M opex. The $2.2M opex is based on maximum production which should be the opex ceiling.
So :
135 (T) * 100 (mtu) * 200(selling price) = $2.7M
This equates to Mogwhy's figure
110 (T) * 100 (mtu) * 200 (selling price) = $2.2M
The only difference is interest payments
Mogwhy - This makes sense to me. I like to keep the interest payments up front as it is an ongoing cost. I can't see any reason why BR would not be supportive. Thanks
Mogwhy - This makes sense to me and can't see why opex costs would vary. So at 160T production this is $3.36M revenue per month. So costs of $2.2M+$0.5M(interest) still leaves $0.6M profit. Does this put production breakeven around 135T?
I assume the interest is currently accruing?
Mogwhy - Thanks for this. Are you saying the opex is fixed at $2.2M/month or varies with production? e.g. does opex go to $1.76M at 160T? I don't see why there would be such a large variation?
Franny,
The main reason I'm asking is because DB is so against the company. I'm only trying to understand why. From what I have heard so far the main concern is the debt and interest levels. This is a valid concern , however after consideration I believe as long as production levels reach 160-200T/month the debt is manageable and can be repaid. This leaves the question of why the production levels would not be met. If DB has an opinion on that then I would be happy to hear it and consider that as well.
I suppose I'm just interested in hearing contrarian views.
Safety
Yes I agree that the costs are generally fixed. My example put the costs (not including interest) around $2.5M per month. That has to be way too high to operate a small company in a month. The equipment is paid for so I assume the costs are people, transport, power, tax, sundries (explosives...) etc.
Struggling to see why this would be more than $1.5M per month which roughly lines up with a $100/mtu cost with production at 160T. So even including interest (which has to be factored) that’s a profit of $1M per month with output of 160T.
I like the 160T example as this leaves upside for 200T.
DB - thanks for your full response. This does make the calculations clearer to me. The interest payments are certainly not insignificant.
My back of the packet calculations make 160 T/month a rough break even at a production cost of $150/mtu.
So approximately $3M income vs $3M cost including interest repayments around the value you quoted. This assumes a $200/mtu selling price.
However this does not include Regua. I did note that MM stated the initial Regua output would be counted with the La Parrilla output. It was not clear that the 160T short term targets for La Parrilla included Regua output.
As noted my original question still stands. Do you think the mine is capable of 160-200T of output per month?
Thanks for the responses
I’m not saying I will take advise from anyone. However I’m looking for reasoned argument.
DB - the bottom line is you don’t believe the company can pay back the current debt. Do you believe the plant can output 160-200 T/month? If not what are the reasons in your opinion?
It seems to me this is a state of the art brand new mine. Funding is in place to cover the next few months. If a production figure of 160-200 T/month is achieved do you think WRES will succeed? For me and safetyman’s calculations it seems 160T/month makes the company very profitable? Easily covers debt repayment.
Yes - This means that hopefully there is enough cash until the company is profitable. The big figures are still Production rates and Cost of Operations. It seems to me there is enough cash to pay the bills until the 80% production figure is met. If this happens this quarter the company should be successful?
Yes I believe he has been optimistic in the past and with the benefit of hindsight
However I am interested in your opinion on my other questions. The mine is in production. You are sceptical about production and cost figures. Why? Is it simply because you don't trust MM?
My first post so be gentle
It seems DB you are sceptical about two figures :
1) Future Production Output
2) Cost of Operations
MM stated today that output should get to 80% of 200T/Month pretty quickly (Q1?). If this happens surely this puts the company on a path to success? I would like to hear more on why DB does not believe the production rates will be met.
I don't believe we are privy to the Cost of Production apart from a target figure stated by MM some time ago. This is an important figure. DB - do you believe this figure will be a lot higher than stated? If so why?
I can only admit to reading some literature and basically believing what MM says. I think he has been optimistic in the past. It's tough turning ideas on paper into reality (in all walks of life) and there are bumps in the road. From the RNS today I am optimistic